Industrial Mr Eng 2009mid

INDUSTRIAL MARKET INDUSTRIAL MARKET Existing stock (sqm) 1 800 000

1 600 000 1 400 000

496 000 1 200 000

436 000

1 000 000

396 000

800 000 600 000

396 000 381 000

400 000 200 000

1 051 000

940 000 415 000

684 000

536 000

0

2005

2006

2007

Speculative

2008

2009 H1

BTS

Speculative & BTS take up (sqm)

Vacancy (%)

350 000

22,1%

25,0%

300 000 20,0%

17,0% 250 000 200 000

12,1%

9,1% 9,5%

15,0%

333 000

150 000

10,0%

100 000

167 000 50 000

183 000

5,0%

92 000 26 000

0

2005

2006 Take up

2007

2008 Vacancy

2009 H1

0,0%

MID-YEAR MARKET REPORT - 2009  At the beginning of 2008 Colliers forecasted the completion of 390,000 sqm of new speculative industrial warehouse space, of which 250,000 sqm was realized and 130,000 sqm was under construction at the end of the year. 110,000 sqm was handed over in H1 of 2009, raising Budapest speculative property stock to 1,051,000 sqm, with 263,000 sqm (25%) vacant as of June 30th. In H1 of 2009 no significant new transaction was signed on the built-to-suit market, although some buildings that were pre-leased last year were completed, raising built-to-suit property stock to 469,000 sqm, including two (former Rynart) vacant buildings totalling 73,200 sqm (15,6%).  The industrial vacancy rate as of June 30th was 22.1% (336,200 sqm), which shows significant growth compared to end of 2008 figures (234,000 sqm / 17,0%), and is due to the buildings handed over at the beginning of the year. Similar to the tendency of the past couple of years, units without tenants are scattered throughout Budapest and its surroundings, comprising of mainly smaller to middle sized units. In terms of unit size, spaces available for lease exceeding 10,000 sqm were only available in seven locations, although these buildings contribute extensively to the number of vacancies (52.4%).  During H1 of 2009, approximately 25,000-30,000 sqm of property became vacant as a result of tenant departure, which roughly equals the amount of new take-up (26,400 sqm). This tenant activity is a mere fraction of last year’s record breaking H1 take-up (190,000 sqm) and of the entire last year’s take-up (350,000 sqm). The majority of lease transactions (nine transactions) were concluded in city logistics warehouses and ’small unit’ buildings (8.800 sqm), and only six smaller transactions were recorded in ’big box’ buildings (17.500 sqm), of which two were expansions.  In spite of high market activity, the number of actual transactions is low. Most potential tenants would rather wait or postpone their decision to relocate, or in some cases they renegotiate the terms and extend their present contract.

INDUSTRIAL MARKET INDUSTRIAL MARKET

MID-YEAR MARKET REPORT - 2009

Major Leasing Transactions in 2009 H1 Highway locations ("big box") Tenant

Location

Landlord

Size (sqm)

Archirex

M5 - Gyál Business Park

Autóker

2 514

Docutár

M5 - Gyál Business Park

Autóker

1 660

NA

Europolis Park Budapest Airport

Europolis

1 775

Rudolph Logistics

WestLog

Industrial Securities Europe

4 700

Schneider Electric

ProLogis Park Budapest Sziget

ProLogis

4 714

Veco Immo

Euro-BusinessPark

Immoeast

2 180

PRE=pre-lease

EXP=expansion

BTS=built-to-suit

EXP

EXP

City Logistics ("small units") Location

Landlord

Size (sqm)

Elektromont

DAN Üzleti Park

W-GO 2000

740

Logicom

Citypoint9

ConvergenCE

500

Magyar Posta

inNove Business Park

Altan Beton

1 260

NA

Dél-Pesti Üzleti Park 1

Wing

440

NA

Dél-Pesti Üzleti Park 2

Wing

1 300

NA

Europolis Park Budapest Airport

Europolis

1 123

Seoul Metal Europe

Dunakeszi South Industrial Area

ATRO

900

Pet Pack

Europa Center

Terra Invest

2 000

Wicke

Europa Center

Terra Invest

550

PRE=pre-lease

EXP=expansion

BTS=built-to-suit

 Speculative developer activity – especially in larger volume – is practically nonexistent. The handover of another 50,000 sqm of mainly “small unit” type buildings at city locations is expected, but not at project sites, in the form of individual buildings. Currently, only a handful of smaller buildings are expected to be handed over in H1 of 2010.  Activity in the sale transaction market is quite low, with only the occasional small land and building transactions by end users taking place. We have no knowledge of high volume developments or developer transactions in the countryside. Expansion (sqm) 80 000

PRE

45,0%

41,9%

70 000

40,0%

60 000

35,0%

50 000

19,9%

26,4%

24,5%

16,8%

40 000

30,0% 25,0% 20,0%

69 600

30 000 20 000

13,3%

15,0%

48 100 34 200

10 000

10,0%

44 200

5,0%

15 500 6 374

0

2004 Expansion

2005

2006

2007

2008

2009 H1

Expansion (%) / Yearly Take up

0,0%

Expansion (%) / Yearly Take up

Tenant

 Regarding rental rates, quite a few developers were offering reduced prices – € 3.5 / sqm / month or even lower net prices – for recently completed vacant buildings or recently emptied big box warehouse space left by tenants. Meanwhile, net asking rents for standard property stock were characteristically between € 3.84.5 / sqm / month. There seems to be significant difference between discounted lease rates and standard prices. Also, the appearance of a new pricing category is expected for warehouses built based on pre-leases. The pricing levels and calculation basis of these rents will be vastly different from those seen in previous years.