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New supply therefore is highly welcome on the industrial market, where Occupiers have no other choice than to renew on the current market as there is essentially zero free warehouse capacity country- wide. While built-to-own market never really endured a crisis, it is promising that the developer-led market has elevated to a new level in 2020 - mostly still confined to the Greater Budapest area. Industrial occupiers have adjusted their expansion plans to the current market reality and are willing to sign leases at significantly higher rates than in the previous cycle. In today’s market, the supply side is the clear bottleneck to further growth. Office occupiers also got used to the landlord- favored market conditions in previous years, and are now more aware of the importance of timing and strategic planning when it comes to any real estate decisions. Although slightly better than the Industrial market in terms of new supply, this plus an increase in office occupier demand, has meant that many office occupiers are left with limited choices on the market, so are pressed into renewing in situ. In fact given that 55% of all companies over 3,000 sq m renewed, it further reinforces the need for them activate their requirements well in advance of their lease expiry or accept that they will stay and renew.

Budapest still proves popular for large International companies and continues to attract more business fromglobal corporates. That being said since February 2020, we have noticed some occupiers applying more cautiousness to their office presence and either delay or postpone their requirements. This could be a temporary effect of the coronavirus epidemic, or a revisal in the demand trend subject to wider global uncertainty, it is simply too early to tell. Pipeline in the office segment increased by 12% since early 2019, partially because of the unfortunate delays of previous projects but also because of developers’ bullish views of the current market situation. In fact, landlords have little to worry about leasing as 80-85% of the 2020 pipeline will already be acquired as we move into Q2 2020. While the development pipeline looks stronger across all asset categories, hotels must be mentioned separately. The Budapest city centre will welcome 24 new hotels in coming years, adding a remarkable 3,000 rooms to the current supply. This will be a gamechanger for some of the current hotel operators, who are used to solid KPIs and steadily increasing demand - as some of these occupiers are little prepared to see fresh competition in a lower growth environment which we are heading into over 2020.