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Hungary Outlook 2022

Orsolya Hegedűs • 16/03/2022

The Hungarian Real Estate Markets Outlook 2022 focuses on investment, office, retail, industrial and hospitality markets, identifying the trends that will help real estate decision making for 2022 and beyond. 

Key highlights: 

2021 investment volumes continued to trend upwards  

Total investment volume in the core CEE markets reached Eur 9.4 billion in 2021. Whilst total volume increased 6.9% on 2020 levels, this is still 15% below the five-year average. Industrial and office investment activity continues to dominate. 

Whilst 2020 and 2021 investment volumes were down on recent years in Hungary, they exceeded the €1bn mark and were significantly stronger than levels seen in the post Global Financial Crisis period indicating a quick return to more usual market volumes.  Investment volumes reached Eur 1.14 billion in 2021. 

International capital continues to be active in Hungary, and domestic sources of capital continue to hunt increasingly larger opportunities. Indeed, more than 40% of the capital invested in commercial real estate in 2021 originated in Hungary. 

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Budapest’s office market

A resilient post-pandemic recovery is anticipated. 

The Budapest office market has entered the pandemic with solid fundamentals. Whilst demand levels were restrained in the last two years compared to recent years, it is worth remembering that, despite events such as the Global Financial Crisis, Budapest’s leasing market has never contracted for two successive years. Indeed, demand in 2021 has shown the signs of recovery (+ 11% year-on-year).  

Vacancy remains below the critical 10% threshold and new supply is constrained – meaning confidence remains that Budapest will bounce back strongly in 2022. Economic momentum is expected to remain strong in 2022 and the Business Sentiment Index reached a 2.5-year peak showing optimism in the business sector. 

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Strong credentials for logistics and industrial businesses

Having a more extensive infrastructure than its key CEE peers, the lowest labour costs of the V4 and the lowest corporate tax rates in the EU – as well as being acknowledged as an easy place to do business, Hungary is particularly well placed to capitalise. 

The industrial production in the CEE countries was hit hard by the first wave of the pandemic, and likewise the total industrial output has contracted by 6% per annum in 2020 in Hungary. Since then, the industrial production and exports have strongly rebounded, and even exceeded pre-pandemic levels.   

According to CSO data, industrial production improved by 9.6% in 2021, with a very strong second quarter being registered. As a result, industrial confidence index has improved to levels seen in 2019, according to EUROSTAT.  

In Cushman & Wakefield’s Manufacturing Risk Index 2021, the core CEE countries were ranked in the second best quartile based on the post-Covid ‘Bounce Back rating measures’ assessing a country’s ability to restart its manufacturing sector. Those counties with economic conditions and infrastructure supportive of a faster recovery were at the top of the ranking. 

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Retail market trends - Hungary vs Budapest  

With 18% of the country’s population exceeding 1.74 million inhabitants, Budapest is by far the CEE’s most dominant capital. Only six other cities in Hungary have a population exceeding 100,000. The largest is Debrecen, which has a population of 200 thousand. 

The Hungarian economy demonstrated resilience to the second and third waves of the pandemic-induced restrictions and the labour market showed the signs of tightness. The unemployment rate has trended downwards, standing at 3.7% as at year-end 2021 which is only 20 basis points above its pre-pandemic levels. 

Pre-pandemic retail sales growth was solid in Hungary and the strongest in the CEE region. Whilst the overall economic impact of the pandemic was weaker than anticipated and the consumption pattern has somewhat changed, the share of food & beverages sales remained dominant.  

Private spending on fashion, household furnishing and books are recovering, but remained under pre-pandemic levels in 2021. The total retail sales, however, have grown by 3.5% in 2021 compared to 2020 levels. 

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Hospitality in context 

The impact of COVID-19 on the hospitality sector was dramatic and rapid across all markets and hotel tiers. Nonetheless, whilst markets prove their ability to recover, investors, operators, and other industry stakeholders remain confident about a healthy and positive market recovery.  Respectively, Budapest is demonstrating strong capabilities for recovery, currently being the best performing market amongst other CEE capitals. At the same time, operators and investors continue to be highly interested in establishing a footprint and or further growing their market share in Budapest due to the city’s healthy market fundamentals entering COVID-19. 

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Current Reports

Hungary office property 2022
HUNGARY OFFICE OUTLOOK

Vacancy remains below the critical 10% threshold and new supply is constrained – meaning confidence remains that Budapest will bounce back strongly in 2022. 

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Hungary industrial property 2022
HUNGARY INDUSTRIAL OUTLOOK

Industrial production and exports have strongly rebounded for Hungary, and even exceeded pre-pandemic levels.  

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Hungary retail property 2022
HUNGARY RETAIL OUTLOOK

Private spending on fashion, household furnishing and books are recovering, but remained under pre-pandemic levels in 2021. Total retail sales, however, have grown by 3.5% compared to 2020.

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Hungary hospitality 2022
HUNGARY HOSPITALITY OUTLOOK

Budapest is demonstrating strong capabilities for recovery in the hospitality market, currently being the best performing market amongst other CEE capitals.

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Hungary capital markets 2022
HUNGARY CAPITAL MARKETS OUTLOOK

Investment volumes reached Eur 1.14 billion in 2021 and more than 40% of the capital invested in commercial real estate in 2021 originated in Hungary.

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