Budapest Business Journal 3019

VOL. 30. NUMBER 19

OCTOBER 21 – NOVEMBER 6, 2022

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

Photo by Lázár Todoroff / AmCham

HUF 1,850 | EUR 5 | USD 6 | GBP 4

SPECIAL REPORT INSIDE THIS ISSUE

Real Estate Development Opportunities Exist, But Market Becoming More Cautious With economic and geopolitical uncertainties barriers to development in office, retail and hotel, future development patterns look uncertain.

Even in the industrial sector, rising construction and energy costs can be a brake. Investors are adopting a waitand-see approach to the markets.  10

Industrial Sector Continues to Boom The industrial and logistics sector boom continues unabated, as demand remains high, vacancy stands at a record low, e-commerce expands and provincial hubs finally emerge.  24

The BusinessPolicy Back Channel

SOCIALITE

The Hotel GM and the Dragon Boat World Champs As he goes about his high-powered work, making sure everything at Budapest’s luxurious Anantara New York Palace Budapest Hotel runs smoothly, you’d never know that Tamás Fazekas is also a World Champion.  33

NEWS

Hungary to Face High Inflation Well into 2023 The inflation rate broke a nearly 26-year record in September, reaching 20.1%. Analysts expect high prices will remain a factor for the majority of next year as well.  3

BUSINESS

AmCham Hungary president Zoltán Szabó and CEO Írisz Lippai-Nagy discuss what the chamber is doing to help members in a challenging economic environment and its relations with the Hungarian government and the U.S. Embassy. 6 SOCIALITE

Sopron Surprises as it Emerges From Burgenland’s Shadow As a wine region and a city, Sopron literally sticks out from the Hungarian pack, jutting out into Austria’s Burgenland. Long in the shadow of its neighbor, it is finally making wines that are at least a match for it in terms of quality.  35

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News

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

IMPRESSUM EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia

Czifra, Kester Eddy, Bence Gaál, David Holzer, Christian Keszthelyi, Renáta Kónya, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth.

LISTS: BBJ Research (research@bbj.hu)

THE EDITOR SAYS

THE ETERNAL OPTIMISM OF THE BRICKS AND MORTAR MERCHANT Real estate developers are, pretty much universally, a positive bunch of people. They have all the enthusiasm of the natural salesperson, unsurprising since their job is to sell you an idea or an asset, depending on where you meet them on a project timeline. That’s not to say they are relentlessly upbeat. I have, on several occasions, enjoyed hearing a group of them exchanging complaints about who has gazumped whom for a particular plot, or the lack of transparency in the planning process, or how today’s problems are nothing compared to doing business in the republics of the former Yugoslavia in the Nineties and Noughties. But that aside, they are a “glass half full” species.

I was struck, during the pandemic, by how relaxed they were about the whole “death of the office” line of reasoning. One regional developer produced studies which, it argues, prove that most people prefer to be in an office. As one of my more cynical colleagues puts it, “Well, they would say that, wouldn’t they!” But I have spoken to enough CEOs to know that there are probably three times as many keen to get staff back in the office as there are those ready to embrace the flexibility that remote working offers. The divide largely depends on their field of business and just how tight the labor market is for the skillsets they need. IT firms are generally much happier to embrace a “work anywhere” mentality, not least because so many of their staff demand precisely that. And while almost everyone seems prepared to consider variations on the hybrid theme (albeit with plenty of arguments about where the office vs. home split should fall), I have read some isolated views from America which condemned hybrid as “the worst of all possible worlds” and called for one or the other, but not both.

As the Special Report in today’s issue on Real Estate Development makes clear, the market is pretty healthy,

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especially in the industrial and logistics sector. But that doesn’t mean there aren’t a few dark clouds gathering.

The ongoing pipeline continues, but new projects are increasingly on hold. That makes sense when finance is getting more expensive; why build today when it will be cheaper tomorrow? But as our Macroscope report on page three makes clear, if inflation continues in the high double digits well into 2023, when exactly will tomorrow come? The war in Ukraine has had a direct impact on the supply chain for raw and finished materials. It may also have some effect in scaring off the more risk-averse investors, although looking at Hungarian fundamentals (not to mention a map) ought to provide comfort.

Energy is the big concern for everyone. It makes sustainability and energy efficiency ever more important for developers in terms of the costs of running a building, attracting tenants, or finding investors to buy. But I wonder if there might not be a more immediate concern. Our daily newsletter Hungary A.M. carried a story on Wednesday, October 19, about a city center hotel that has announced it will take no bookings over the winter period because of the cost of energy. We know of several cultural institutions that have taken similar steps. If those same costs make it more attractive for an employee to commute to the office and let work pay for the heating (an argument I have heard from at least one developer), might there not also be businesses who think the same, but in reverse?

These are, as everyone keeps telling me, interesting times.

I don’t believe any of the developers I speak to regularly are about to give up their membership of the positivity club, but there might at least be a nanosecond’s pause for thought come renewal time.

Robin Marshall Editor-in-chief

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THEN & NOW István Szepsy of Hungarian winery Szepsy Pincészet Úrágya, which has a vineyard in Mád (220 km northeast of Budapest in the Tokaj wine region), has been named a member of the Golden Vines Hall of Fame at the II Golden Vines Awards in Firenze.

His winery was also named the best in Europe. The black and white image from the Fortepan public archive shows gentlemen enjoying a glass of wine in the cellar of the Agrária Szőlőtelepítő Corp. in Ecséd (74 km northeast of the capital) in 1933.

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Budapest Business Journal | October 21 – November 6, 2022

News

• macroscope

Hungary to Face High Inflation Well into 2023

The inflation rate broke a nearly 26-year record in September, reaching 20.1%. Analysts expect high prices will remain a factor for the majority of next year as well.

ZSÓFIA CZIFRA

Climbing slightly above expectations, Hungary’s September data also saw a 20.7% core inflation. The acceleration was mainly attributed to suddenly jumping overhead costs and rising food prices.

In one month, consumer prices increased by 4.1% on average. Compared to September 2021, a price rise of 35.2% was recorded for food, within which the highest price increase was for bread (76.2%).

Due to the changes in the regulations on household utility prices effective from August 1, the cost of electricity, gas and other fuels went up

by

62.1%

on a yearly basis.

In a monthly comparison, consumer prices increased by 4.1% on average. Food became 3.5% more expensive. The cost of electricity, gas and other fuels went up by 59.2% due to the rise of natural and manufactured gas as well as electricity prices.

Raised Projections

“After the September data, we will most likely have to revise our forecast for peak inflation, which anyway projects a peak in December with inflation of 20.8%”, commented Péter Kiss, Amundi’s investment director.

According to him, an essential question for the next period is how the data will affect monetary policy. The central bank has somewhat tied its own hands by announcing the end of the interest rate hike cycle, although it has continued to tighten through other tools, as it said it would.

One positive factor in the data is that despite the weak forint, consumer durables did not exert more significant pressure; indeed, a year-on-year decrease was already observable, Kiss noted. He believes inflation of

around

20%

could be maintained in the coming months and expects a substantial decrease only from the second quarter

Inflation in EU Member States (September 2022) 12-month change in consumer prices

Estonia Lithuania Latvia Hungary Czech Rep. The Netherlands Poland Bulgaria Slovakia Romania Croatia Greece Belgium Denmark Austria Germany EU average Slovenia Sweden Euro area Portugal Italy Cyprus Spain Luxembourg Ireland Finland Malta France Source:

of next year. Of course, this is only valid if the price stops are maintained, he added.

ING Bank analyst Péter Virovácz pointed out that the weakening of the forint significantly affects the price of imported products, which can put further upward pressure on inflation.

In addition, an increasing proportion of companies are faced with higher energy bills, which may trigger new rounds of repricing. This can drive up the price of industrial products and services. In light of the September data, this year’s average annual inflation may reach 14%, and next year, the average may be even higher, at around 15%, Virovácz war.

According to Bankholding analyst Gergely Suppan, inflation, which will continue to rise in the coming months, could reach 24-25% without the price restrictions. However, the measures introduced in the case of certain foodstuffs have largely been passed on to other products, he noted. Inflation may rise slightly above 21% by the end of the year, but from the beginning of 2023, he expects inflation to decrease due to base effects.

The outlook for inflation is still not favorable, and according to Erste Bank calculations, the annual rate of price increase may remain above 20% even into the second quarter of 2023, said analyst János Nagy. He does not expect

to see a single-digit inflation rate again until next September at the earliest, although there is significant uncertainty in this, he warns.

High Rate to Remain

In its latest forecast, the International Monetary Fund also warned that the inflation rate might linger at a higher level in Hungary for some time.

After 5.7% economic growth in 2022, activity may slow down significantly next year, and the IMF now expects only 1.8% growth. However, the forecasts of the latest World Economic Outlook (WEO) publication are still higher than the figures in the National Bank of Hungary’s recently published inflation report. The central bank expects economic growth of 3-4% this year and 0.5-1.5% in 2023; compared to this, the IMF forecast is rather optimistic.

According to the IMF, there will be hardly any decrease regarding the annual average inflation next year; after this year’s 13.9% figure, the price increase may still be

at

13.3%

in 2023. Incidentally, this also falls within the relatively wide range estimated by the MNB.

Energy prices are 40-50% directly responsible for the current generally high inflation and 30% indirectly, Prime Minister Viktor Orbán recently claimed. That means the inflation is clearly the result of the failed sanctions policy, he emphasized.

Had Hungary not been able to exempt itself from the oil and gas sanctions, inflation would be even higher, and there would not be enough energy, he claimed.

According to him, the government, fortunately, has experience in how to fight inflation from when it first returned to power in 2010.

“I asked the governor of the central bank and instructed the finance minister that by the end of next year, this inflation should at least be halved to single digits,” Orbán said.

Numbers to Watch in the Coming Weeks The Central Statistical Office (KSH) will publish August earnings data on October 24.

A few days later, the KSH will release the September labor market figures.

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News

WHO’S NEWS

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Budapest Business Journal | October 21 – November 6, 2022

Do you know someone on the move? Send information to news@bbj.hu

Baker McKenzie Strengthens Employment Law Practice Baker McKenzie Budapest has promoted Nóra Óváry-Papp, who joined the employment team in Budapest in 2019, to counsel.

As a lead attorney, ÓváryNóra Óváry-Papp Papp advises the firm’s clients on various employment matters, from immigration to collective labor law and employment protection. She has extensive experience advising domestic and multinational companies on employment matters, including traditional issues, management terminations, and other critical employment services, such as business transfer transactions and restructuring. Óváry-Papp also has experience in whistleblowing matters, assisting clients in training, conducting employee interviews, drafting questionnaires, advising on employer decisions, and developing and reviewing workplace protocols. She also has extensive practical experience in atypical employment nationally and internationally.

Óváry-Papp graduated from the faculty of law of Eötvös Loránd University in Budapest. Previously, she worked in law firms with international clientele, advising on several domestic and cross-border corporate, banking, and finance transactions, in addition to employment law matters. She also gained significant experience in data protection matters.

Head of Audit Services at EY Hungary Zsolt Kónya became EY Hungary’s head of audit services this summer.

With nearly 20 years’ professional experience, he started his career at EY, where he built up the financial advisory business within the accounting practice in 2017, drawing on his extensive experience in the industry and the knowledge base available within the consultancy.

As head of audit services, he will develop an operating model that allows staff to develop faster and support the firm’s clients more effectively.

“With Zsolt, a leader who has already proven his ability to take the business to new heights takes the helm,” said Botond Rencz, country managing partner for EY and CSE central cluster and Hungary tax leader.

“His expertise and experience will ensure that we continue to serve our clients, whether they are successful domestic companies, entrepreneurs or multinationals, Zsolt Kónya to the highest possible standards,” he added.

Kónya commented, “Our profession is undergoing a major transformation. I see it as my personal mission to ensure the long-term success of the business, which is based on the satisfaction of our clients and employees.”

Kónya’s predecessor, Zsuzsanna Bartha, will remain at EY and focus on the capital markets, looking to develop the consultancy’s client base further.

AutoWallis Appoints ESG Director, Consultant In preparation for the company obtaining ESG certification, AutoWallis Group has appointed Gábor Székely as ESG director and selected Deloitte as a consultant. Székely retains his position as director of investor relations.

Deloitte will help AutoWallis by preparing its ESG report and assisting in working out the measures necessary for obtaining an ESG certification as quickly as possible. Present in 14

countries in the region, AutoWallis says it is looking to ensure that sustainability-related factors are suitably validated to the correct extent in all areas of its operations.

A priority is to recycle as much of its waste resulting from operations as possible, to make the group’s day-today operations more energy efficient, to increase the use of renewable energy sources, and to favor environmentally responsible suppliers. In addition, the group wishes to increase its social commitments and meet the targets specified in the ESG framework as part of corporate governance.

AutoWallis is the first company listed in the Premium Category of the Budapest Stock Exchange to develop a Green Finance Framework, based on which it successfully Gábor Székely issued green bonds. Székely explained that obtaining ESG certification, planned for no later than 2024, has several positive aspects besides the obvious environmental and social advantages.

It would, for example, allow investment funds that target businesses committed to sustainability to purchase the company’s shares.

PRESENTED CONTENT

#FeelGoodDoGood Bonfire Party to Support Children, Refugees As in previous years, the party, which also celebrates XpatLoop’s 22nd anniversary, will support Hungarian children’s charities.

A food bank supporting Ukrainian refugees has been added to the beneficiaries this year.

BBJ STAFF

XpatLoop is using the social media hashtag #FeelGoodDoGood to promote the fundraiser, which, it says, “unites good-hearted guests from the international community in Hungary.” Once again, FirstMed is the principal sponsor.

Entertainment includes live pop, soul and funky tunes by Fruzsi & Badman, a light show by ElmoStix, the traditional virtual bonfire and fireworks display by Special Effects International, wine blind tasting, roulette and blackjack tables for fun (not money), plus pop, rock, and & dance hits from DJ Woods.

Regular Master of Ceremonies Hans Peterson will guide proceedings all evening, including hosting a Live Auction and announcing the winners of the Silent Auction.

All auction proceeds go to support three local charities: The Magic Lamp Wish Granting Foundation (Csodalámpa), which helps three18-year-old children suffering lifethreatening illnesses; the Young People in Need (Rászoruló Fiatalok) NonProfit, which focuses on solutions to emotional abuse of Hungarian children up to the age of 18; and The Autistic Art Foundation (Autistic Art Alapítvány), which conducts research to help spread autism awareness, housing facilities and care for people with autism.

Food Bank Support

There will also be a raffle, for which tickets will cost HUF 2,000 each, with all proceeds going to the Food Bank for Refugees-Budapest, which supports displaced Ukrainians in Hungary, feeding around 130 people per week and providing them with groceries and hygiene items.

XpatLoop publisher and Bonfire Night organizer Stephen Linfit (right) with British Ambassador Paul Fox, pictured at the 2021 event.

The wide-ranging international buffet selection will include tastes from British, Chinese, Italian, Indian, Lebanese, and Mexican cuisine, not to mention savory snacks, grilled food, pizza, salads, artisanal donuts, and a birthday cake. Drinks include craft beers, Jell-O Shots, wine, single malt whisky and pálinka tasting, a Unicum Cocktail Bar sponsored by Zwack, plus a range of soft drinks and water Guests will receive a free day pass to the Fitness & Health Club by Marriott Budapest worth HUF 4,500 and a HUF 50,000 Voucher for Dr. Rose Private Hospital as welcome and farewell gifts, respectively.

Confirmed VIP guests include Dutch Ambassador Désirée Bonis, Irish Ambassador Ronan Gargan, British Deputy Head of Mission Andrew Davidson, and Duncan Graham, chairman of the British Chamber of Commerce in Hungary.

“As a Brit and as ambassador, I am proud that XpatLoop.com has held celebrations for Bonfire Night for over a decade,” said U.K. Ambassador Paul Fox last year. He cannot attend this year as he will be in London. “Not only have they been some of the best parties in town, but also events that have raised incredible amounts of funds for a number of worthy causes,” the ambassador added.

Tickets bought ahead of the evening are HUF 15,000 per person (guests must be 18-plus), with a gala table for 10 people costing HUF 150,000. A limited number of on-the-spot tickets will be priced at HUF 20,000. There is also a “Philanthropist Ticket” for HUF 30,000 for those who want to make a more significant donation to charity.

The evening runs from 6 p.m. to 1 a.m., with the dress code being smart-casual, although guests are welcome to dress up for the occasion if they wish.

Visit the xpatloop.com website to learn more about the fundraiser and register for tickets. The Budapest Business Journal is a media sponsor of the Bonfire Night Celebration.

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Budapest Business Journal | October 21 – November 6, 2022

News | 5

Ukraine

Hungary Raises Questions Over Further Support Crisis Roundup Hungary supported the funding of a further EUR 500 million

by European Union member states to support Ukraine’s Armed Forces through the European Peace Facility (EPF) at a meeting of EU foreign ministers in Luxembourg on October 17.

NICHOLAS PONGRATZ

However, Minister of Foreign Affairs and Trade Péter Szijjártó said that while Hungary had agreed to this round of funding, with a contribution of EUR 10 mln, he could not guarantee that this would be the case next time, adding that the fund now totaled at EUR 3 billion.

Hungary’s foreign minister also exercised what he called a “constructive abstention” toward an initiative that would establish a Military Assistance Mission to train Ukrainian soldiers, saying that other member states are free to participate and contribute, but Hungary would not.

“We do not think that anything leading to an escalation is a good idea,” Szijjártó explained.

During the UN General Assembly in New York in September, Szijjártó had met with Russian Foreign Minister Sergei Lavrov, despite an explicit request from the EU not to conduct bilateral

negotiations with the country. Although he received flak from opposition politicians and international observers, Szijjártó defended his decision in a post on Facebook on October 9.

He said the talks had directly contributed to Hungary concluding an agreement with Gazprom to reroute gas shipments to Hungary through the TurkStream pipeline and that continued dialogue was necessary to achieve peace.

At a summit of European Union leaders in Prague, which concluded on October 7, Prime Minister Viktor Orbán also expressed a reluctance to continue with the bloc’s current policies and emphasized the necessity of seeking peace. The PM insisted that the sanctions against Russia must be changed.

Bleeding Out

“Russia has not been brought to its knees at all while European economies are bleeding out,” he claimed. Adding that sanctions were to blame for “sky-high” energy

In this photo released by the Prime Minister’s Press Office, Prime Minister Viktor Orbán (right), former Colombian President Andres Pastrana (center), the president of the Christian Democratic International organization of conservative parties, and former Slovenian Prime Minister Janez Jansa, vice president of the CDI (left) before a working dinner at the Carmelite monastery on October 17, 2022.

Strategies and opportunities for cooperation available to right-wing, Christian, and conservative parties in the current situation created by the Russo-Ukrainian war were discussed. Photo by Zoltán Fischer / MTI / Prime Minister’s Press Office

prices that are “practically impossible to pay,” Orbán acknowledged that “all of the important Hungarian national goals” had been achieved during the meeting; Hungary managed to negotiate exemptions from the sanctions affecting crude and gas deliveries as well as nuclear energy.

However, stressing the need to work towards “a cease-fire and negotiations,”

Orbán emphasized peace was the ultimate solution to these issues.

Yet, despite the rhetoric, Hungary remains committed to supporting Ukraine. At a meeting with the vice president of the International Finance Corporation, a World Bank group member, on October 16, Minister of Finance Mihály Varga declared backing for making more World Bank resources available to Ukraine and neighboring countries affected by the war.

Varga noted that Hungary’s financial support for Ukraine amounted to HUF 28 bln, in addition to the country taking in nearly one million refugees.

Ukraine has been providing support to the Hungarian economy as well.

According to State Secretary Zsolt Feldman of the Ministry of Agriculture, Hungarian feed and manufacturing companies have been buying maize from Ukraine amid a local shortage caused by the summer drought.

While Feldman acknowledged that the rail cargo volume of grain brought from Ukraine to Hungary had averaged 120,000 tonnes in recent months, the Association of Hungarian Logistics Service Centers added that the import of Ukrainian grain has also had a beneficial effect on domestic rail traffic, offsetting the decrease in international traffic caused by more expensive traction energy.

PRESENTED CONTENT

There’s no Good tax Advice Without Industry Knowledge BBJ: What indicators describe the work of Andersen’s indirect tax business?

According to an assessment by the International Tax Review magazine, Andersen Adótanácsadó Zrt. was again the best-performing Hungarian tax advisor this year. Besides the highest professional accolade, the firm has also collected the “Hungary Indirect Tax of the Year 2022” title. We spoke with Bence Barta, the head of Andersen’s indirect tax business, about the awards.

BBJ STAFF

BBJ: To what extent were these awards a surprise? What factors paved the way to you winning the VAT Advisor of the Year title in Hungary?

Bence Barta: In light of our results and the feedback from our clients, we secretly hoped that the ITR would acknowledge our work again this year, but we couldn’t be sure since competition is fierce in the advisory market.

We’ve consciously emphasized this area in recent years and have significantly expanded our team of experts and our range of services. Besides this, we continually monitor the legal practice of the European Court of Justice and Hungarian courts so that we can provide our clients with best-in-class services.

It’s a critical success factor that Andersen’s international network has solid competencies in indirect taxation,

which helps us tremendously. It is not by accident that ITR has ranked the overall performance of Andersen’s offices in the top five for this category at the European level.

BBJ: Apart from these, what other qualities characterize the firm’s indirect tax advisory services?

BB: I’d highlight client focus and maximum satisfaction of client needs because, in this respect, we probably make even greater efforts than our competitors. It’s manifested in how, first and foremost, we develop practical solutions for our clients and support them during their implementation.

We represent a new approach and, in many cases, implement creative and novel ideas, for which a thorough understanding of case law is indispensable. Additionally, we also spearhead the preparation of clients for legislative changes.

Bence Barta BBJ: How much do you need to know about your client or the industry to complete an assignment?

BB: In the past, it was enough to know the tax laws well; today, clients need much more complex advice, so we don’t just need to understand them thoroughly but also the economic environment in which they operate. You can’t give relevant tax advice without up-to-date and in-depth industry knowledge.

Let’s take, for example, the energy sector, from which we receive a lot of assignments.

It is a very strictly regulated market that has its particular operational logic. Without being familiar with it, it’s simply impossible to solve our clients’ problems; we can’t expect them to teach us everything we need to know prior to fulfilling the engagement.

BB: The most important indicator is perhaps the rise in revenues. In both 2020 and 2021, we doubled our revenues from our business compared to the previous years. By the end of August this year, we’d surpassed last year’s level by 60%. We’ve also expanded our team of experts significantly over three years to maintain this growth rate, essentially doubling its size.

The quality of our work is also evident from the increasing complexity and volume of the tasks we receive. We receive plenty of positive feedback and more engagements based on the recommendations of our existing clients. Our strongest references are in the energy, automotive, pharmaceutical, logistics and finance sectors.

BBJ: How long can this growth rate be maintained?

BB: Naturally, it depends greatly on the economic environment and the performance of the Hungarian economy. It is encouraging that we’ve managed to multiply our profits in recent years, despite the negative effects of the pandemic. Another reason I consider the prospects of Andersen’s indirect tax business to be good is that we have an extensive and diversified client portfolio.

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Budapest Business Journal | October 21 – November 6, 2022

Business

AmCham: Serving as a Channel Between Businesses and Policymakers

The leadership team at the top of the American Chamber of Commerce in Hungary, president Zoltán Szabó and CEO Írisz LippaiNagy, sit down with the Budapest Business Journal to discuss what they are doing to help members in a challenging economic environment and relations with the Hungarian government and U.S. Embassy.

ROBIN MARSHALL

BBJ: Former U.S. Ambassador to Hungary Donald M. Blinken recently died aged 96. What are your memories of him from his time here? Írisz Lippai-Nagy: Unfortunately, we did not get to meet him personally, but as an honorary member of our chamber, his legacy is cherished within the AmCham community.

Zoltán Szabó: Ambassador Blinken was a true friend and supporter of our country at a pivotal time. He firmly supported Hungary’s integration into the West and championed our membership in NATO and the EU. We are forever grateful for that and offer our deepest sympathies to his family in this difficult time.

BBJ: The latest diplomat to hold the role, Ambassador David Pressman, was sworn into office in August. You recently met him. What are your expectations of the relationship, and where do you hope to work together?

IL-N: We had a great first meeting: Ambassador Pressman is a highly accomplished, open-minded, and dedicated professional who came to Hungary to build bridges at an incredibly challenging time. It was clear from the start that he was genuinely excited to be here, curious to learn about our country, and eager to work with stakeholders from both sides of the aisle. He wants to make a difference.

ZSZ: We were incredibly humbled by the actions of our members, who immediately stepped up in a time of need. They supported the Ukrainian people and refugees coming to Hungary with donations of food, medicine, clothes, hygiene products, shelter, free devices, and other services. Many have provided aid to colleagues in Ukrainian offices, offering transportation, relocating them to Hungary or other countries, providing accommodation, legal services, advanced wages, you name it.

BBJ: Inflation, supply chain issues, and the ever-tighter Hungarian jobs market also need addressing, with the latter a particular area of focus for AmCham in the recent past. How is the chamber reacting to these pressures?

IL-N: Within our committees and working groups, AmCham members can discuss their experiences and exchange best practices on these issues. We also share these experiences and insights with the government wherever we can.

We will undoubtedly focus heavily on these topics at the Business Meets Government Summit, our flagship event with HIPA, on October 24.

ZSZ: We have also recently surveyed our members to learn how they are dealing with the unexpected inflation rates, the historically low Hungarian forint exchange rates, and how they compensate employees. A significant portion (39%) of the survey participants have already provided some form of compensation for the unexpected inflation rate and one-third are still considering the option. Large and Írisz Lippai-Nagy and Zoltán Szabó. Photo medium-sized companies are more able

by Lázár Todoroff / AmCham. to compensate their employees, but that also varies from sector to sector.

ZSZ: He is a business-oriented man and was keen to learn about the challenges businesses face and how the embassy can offer its support. Hopefully, we can arrange an event with him in the forthcoming months where he can address the wider membership. We are excited to work with him and his team.

BBJ: The key issues affecting Europe and Hungary are the energy crisis for businesses and the cost of living for households. What definitive steps is AmCham taking in working with the government and others to help?

ZSZ: As always, AmCham serves as a channel between businesses and policymakers. We offer a platform for our members to share their concerns and proposals, and we take these issues to the relevant representatives of the government to find solutions to the best of our abilities.

IL-N: Just to give one example, a concerned member reached out to us because their contract with their gas provider was up, and with no new supplier or offer on the cards, they simply could not guarantee continuing operations in the coming months. We contacted Márton Nagy, Minister for Economic Development, and his team about this following his presentation about the impact of the energy crisis and the government’s measures at our business forum. They were quick to help, and the matter was sorted out within a few days.

BBJ: The other major geopolitical issue is the war in Ukraine, where AmCham’s scope for influence is perhaps less obvious. What has the chamber been doing?

ZSZ: During the initial phase of the invasion, we were in contact with our members to find out how they were impacted by the war: the main concerns besides the safety of the people and the escalating humanitarian crisis were supply chain issues, lack of raw materials, energy supplies, employment of third-country nationals, and the total uncertainty, of course. Unfortunately, many of these concerns have become a reality, we are now trying to avoid a recession, and the war rages on still. We have also brought in various experts to brief the membership about the state and economic impact of the war.

IL-N: We consulted with AmChams in the region and across Europe to exchange best practices, learn about the developing situation, and the measures governments and business organizations are taking to help. The AmCham network has also supported AmCham Ukraine directly with donations. We helped one of their colleagues move to Hungary and supported them with accommodation.

Most importantly, we delivered food and supplies to the refugees arriving at Nyugati Railway Station.

BBJ: There was palpable shock among AmCham members on July 8 when the U.S. Treasury Department announced it was terminating the double taxation treaty concluded with Hungary in 1979.

What has AmCham done since, and what is the view of the membership now?

ZSZ: With inflation and crippling energy prices, this topic has taken a backseat, but it is important for us to keep it on the agenda. The United States is one of our most prominent investors and trading partners; we cannot stress how important it is to have a tax treaty with jointly developed tax mechanisms for stability, predictability, and our ability to attract capital. Hungary could be the only EU and OECD country without a tax agreement with the USA. IL-N: When the decision was announced, we held an extraordinary tax committee meeting with tax, legal, and finance directors across the membership to discuss the effects of this decision, find out which companies are most impacted, and formulate our response. We sent a letter to the government, urging them to find a solution with their American counterparts to avoid irreversible reputational damage and further harm to our competitiveness. We received a response, but unfortunately, no progress has been made yet. We seem to be at an impasse, but AmCham is prepared to work with policymakers in any way we can to achieve a breakthrough.

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www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Company Buyout Offer for Waberer’s Cleared A buyout offer for listed Hungarian hauler Waberer’s International has been cleared, the company announced in a release on the website of the Budapest Stock Exchange. MHB Optimum and High Yield are offering HUF 2,336 per share, the statutory minimum, in the buyout, which runs from October 19 until November 18. MHB Optimum will acquire twothirds of the shares offered and High Yield one-third. BDPST Equity, a unit of the real estate management company BDPST Group, earlier agreed to acquire MHB Optimum. High Yield is owned by György Waberer, who built up Waberer’s over more than two decades. The buyout offer was initially announced in July but suspended in September pending approval by the National Bank of Hungary (MNB) of the takeover of Waberer’s insurance unit Wáberer Hungária Biztosító.

Gov’t Signs Strategic Agreement with Alstom Hungary’s government signed a strategic cooperation agreement with French rolling stock manufacturer

News

Alstom on October 14, the Ministry of Foreign Affairs and Trade said, according to autopro.hu. Alstom is committed to increasing its capacity in Hungary and creating new jobs, Minister of Foreign Affairs and Trade Péter Szijjártó said at the signing ceremony. He added that cooperation with Alstom could be further enhanced in hydrogen, noting that the company has built the world’s first hydrogenpowered train. Alstom employs 650 people at a plant in Mátranovák (115 km northeast of Budapest).

Continental Expands Software Development in Szeged German automotive industry company Continental is adding driver assistance and automated driving software development activities in Szeged (170 km southeast of Budapest), Continental Hungary country director Róbert Keszte said at an event at the University of Szeged on October 13. Keszte said Continental had decided to expand the activities of the software development base in Szeged in light of the quality of the local university instruction and the

Business | 7

Japan’s Toyo Ink Inaugurates HUF 7 bln Plant in Újhartyán Japan’s Toyo Ink inaugurated a HUF 7 billion battery parts factory in Újhartyán (45 km southeast of Budapest) on October 18, according to napi.hu [Daily]. The plant will turn out conductive carbon nanotube dispersions for lithium-ion battery cathodes developed for electric vehicles. The dispersions will be delivered to South Korean-owned SK On, which supplies EV batteries to significant automotive industry manufacturers such as Volkswagen Group. The state awarded Toyo Ink HUF 700 million for the investment, which has created 45 jobs, State Secretary Tamás Menczer of the Ministry of Foreign Affairs and Trade said at the ceremony. Katsumi Kitagawa, chairman of Toyo Ink SC Holdings, said the group had made investments to strengthen its capacity to produce advanced

existing community of professionals based in the city. He noted that Continental had operated a plant in Szeged for decades. Balázs Lóránd, who heads Continental Autonomous Mobility Hungary, said a team of 40 software engineers in Szeged would be tasked with preparing data for AI-based

battery materials with the aim of turning the activity into a core business that can generate JPY 20 bln (HUF 56.3 bln) a year.

From left: Ono Josiharu, managing director of Toyo Ink Kft.; Hideki Okaicsi, president of Toyocolor; Kitagawa Kacumi, president of Toyo Ink SC Holdings; State Secretary Tamás Menczer; Junko Szató, Deputy Head of Mission of the Embassy of Japan; the local Fidesz MP Tibor Pogácsás, and Mayor József Schulz. Photo by Tibor Illyés / MTI.

developments. Continental signed a strategic cooperation agreement, extending to instruction and research, with the university at the event.

Continental employs more than 8,000 people at six manufacturing bases, a tire sales center, and its development centers in Hungary.

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Business

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

The U.K. Gilts Crisis: A Harbinger of Things to Come?

US bond return

In 1994, James Carville, an advisor to U.S. President Bill Clinton, stated he’d like to be reincarnated as the bond market because “you can intimidate everybody.”

The U.K. gilts crisis has intimidated with a vengeance.

Corporate Finance columnist Les Nemethy looks at what this might indicate.

U.S. Stock vs. Bond Returns (1920-2022)

US stock return

As Former U.S. Treasury Head Larry Summers famously recently stated: the “U.K. is behaving a bit like an emerging market turning itself into a submerging market.” In 18 months, 30 year Government Bond (gilt) yields have

Source: Bloomberg, Lombard Odier

quadrupled, with most of the acceleration happening over the past six months: You might argue that the United Kingdom is a particular case. Brexit caused a loss of trade markets, accelerated London’s decline as a

financial center, destroyed investment and confidence, and took the country to the edge of a precipice. Liz Truss’ weeksold government pushed it over the edge with a very ill-advised budget.

An optimist might say this is a “oneoff” crisis with little chance of occurring elsewhere. In this article, I will first talk about recent global developments and then provide a brief analysis of why, in my opinion, the U.K. gilts crisis may be a harbinger of things to come.

Some of the recent messages coming from major national and international institutions have shown both inconsistency and a rapid deterioration in outlook.

Oct. 7. The European Central Bank warns of a “potential wave of default on banks.”

Oct. 11. The International Monetary Fund says there is an “increased risk of rapid, disorderly repricing in financial markets […] exacerbated by existing vulnerabilities and a lack of liquidity.”

Oct. 11. The IMF says, “In a severe economic downturn, up to 29% of emerging market banks would be undercapitalized.”

Oct. 11. U.S. Secretary of the Treasury Janet Yellen seems confident: “I’m not seeing anything in markets that causes me to be concerned.”

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Budapest Business Journal | October 21 – November 6, 2022

You might argue that the United Kingdom is a particular case. Brexit caused a loss of trade markets, accelerated London’s decline as a financial center, destroyed investment and confidence, and took the country to the edge of a precipice. Liz Truss’ weeks-old government pushed it over the edge with a very ill-advised budget.

Oct. 12. One day later, Secretary Yellen appears to have spotted something after all. “I’m concerned about the loss of adequate liquidity in Treasuries.”

It is remarkable that Yellen would make such a strongly optimistic statement on the same day as the IMF issues a very negative picture, only to flip-flop the next day. That goes to credibility.

Perfect Storm Building

The upcoming perfect storm that is brewing stems from the confluence of many inter-related factors:

1. record global debt levels; 2. stubbornly high global inflation; 3. supply side constraints (particularly in the area of energy, compounded by serious policy errors); 4. profound macro shocks (COVID-19, the war in Ukraine); 5. the steepest rate hike over any four months in the history of the Fed (against the background of weakening economic performance), and 6. the simultaneously dismal performance of both equity and bond markets.

The world has, in the past, had to deal with a few of these at a time, but never with all at once. Despite global markets being increasingly integrated, there is no evidence of coordination between the central banks. Because of high inflation and tight job markets, the U.S. Fed may continue tightening, at least a few hundred more basis points.

The following chart shows that since the Great Depression, there have been only three years, including 2022 yearto-date, where both equities and bonds had negative returns: Furthermore, the first three quarters of 2022 have given the worst performance of any comparable period for bonds, as well as for a 60/40 portfolio of equity and bonds, in the past century; worse, even, than during the Great Depression.

Business | 9

The Corporate Finance Column Saving Pensions

Now, to come back full circle to the U.K. gilts crisis: the main reason the Bank of England had to suddenly change gear from Quantitative Tightening (QT) to Quantitative Easing (QE) was to save the U.K. pension industry, which risked being completely wiped out by the sudden spike in yields.

Pension funds must make fixed payments on so-called defined benefit pensions. Given the low-yield environment since 2008, they have shifted into ever-riskier investments to generate sufficient yield to service payments.

Given the recent quadrupling of yields, bond prices have come tumbling down.

Not only do lower bond prices make it more difficult for pension funds to make payments, which goes to solvency, but they must also maintain regulatory liquidity ratios, which forces sudden liquidation of assets, driving bond prices further down and creating a vicious circle.

Hence, the Bank of England suddenly needed to reverse from QT to QE to prevent an entire generation of pensioners from being wiped out financially.

These issues are not unique to Britain.

The largest pension industry in the world is in the United States (USD34 trillion), which is experiencing similar, albeit for the time being less drastic, liquidity issues to the United Kingdom.

Yields are expected to continue to surge, which would drive bonds and equities lower, potentially creating a U.K.-type scenario. Could the pension industry become the Achilles heel of the U.S. economy, similar to mortgagebacked securities in 2008-2009?

Allowing pensioners to become financially wiped out is something no government can politically afford.

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm.

He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.

PRESENTED CONTENT

Yettel Hackathon Seeks to Uplift Talent Solutions-seeking Talents Yettel, one of Hungary’s biggest telecommunication service providers, is launching the “Hack it Your Way” hackathon to encourage developers and coders to realize tech solutions for the most pressing issues in business.

CHRISTIAN KESZTHELYI

The 24-hour competition seeks ideas in three main areas and will reward the best projects with an accumulated HUF 5 million in prize money. Mohamed ElSayad, chief commercial officer at Yettel Hungary, walks the Budapest Business Journal through the details of the hackathon.

“Since we launched Yettel, a key area of focus for us has been the idea of balance; we exist to ensure that people have balance in their lives. Why? Because when you do things your way, you can reconnect with your real self, reaching the flow state and coming up with the best creations you can have. We believe that is how you reach balance,” ElSayad says.

This philosophy is at the core of Yettel’s latest hackathon. Entrants receive some guidelines, but the telco wants to stand apart from such competitions and has decided to allow applicants a marked degree of freedom.

The hackathon focuses on three essential standalone issues that need solutions, although the trio is, nevertheless, interconnected in the grand scheme of things. “Hack it Your Way” aims to encourage solutions for reducing household expenses through the use of smart devices; promote more efficient operations for small- and medium-sized enterprises; and rethink urban transport in an environmentally friendly and more energy-efficient way.

But how can Yettel ensure it recruits the most brilliant brains in the Hungarian labor market to find solutions via its hackathon?

Mohamed ElSayad

Bringing Solutions to Life

“We hope to become facilitators by supporting the best ideas with some funding to ensure that they can bring useful solutions to life and a platform where they can meet businesses who need the talent,” ElSayad explains.

The competition aims to help developers, coders, and thinkers reach target audiences and meet business people in the hopes of either developing their pet projects or finding synergies for future collaboration.

“We want to uplift new talent, give them a stage in the framework of this hackathon, give empowerment to their views, and set them on a journey delivering useful solutions for humanity.

The monetary prize here is a ‘thank you’ for the effort entrants put into their project,” ElSayad says.

The 24-hour coding marathon will end with a review and assessment of the solutions and the announcement of the winners in the three categories.

On the last evening of the event, essential stakeholders are invited to come together and meet the brilliant minds of the hackathon during a B2B event.

Yettel’s hackathon is timely. Like other labor markets in the European Union, the Hungarian labor market suffers from a shortage of specialized talent.

Furthermore, the limited talent pool usually ends up in large firms, which means smaller companies can rarely hire such professionals.

“I believe it is essential to ensure a constant flow of education for people to get specialized professionals. Our hackathon also aims to shed light on the best professionals in the country to encourage young minds through their successes to follow suit once they realize the attractiveness and rewarding nature of this career,” ElSayad concludes.

3

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Special Report Real Estate Development

Opportunities Exist, But Market Becoming More Cautious With economic, financial, and geopolitical uncertainties acting as barriers to development and demand in office, retail and hotel, future development patterns look uncertain. Although the industrial sector is booming, here, too, rising construction and energy costs are acting as a brake. Further, investors are adopting a wait-and-see approach to the markets. The Budapest Business Journal asked several leading developers and consultants to give us their take on Hungary’s real estate market.

GARY J. MORRELL

The office leasing process has undoubtedly slowed down. With regard to size, there has been little to no change when it comes to more significant leases; indeed, it is often more straightforward to negotiate larger transactions such as the 16,200 sqm E.On deal. More urgent transactions can take two to three months to negotiate, and the longest deal I have been involved in took almost two years.

The average size of transactions in our buildings is about 1,500-2,000 sqm.

Tenant specifications include more open space, more collaborative space, focus rooms and private spaces.

The office market has slowed down and many new developments will not be initiated, although those that have already started are ongoing. Given the right opportunity and a good development plot, we would consider launching a new development project.

With the increase in costs, we need to procure materials and conclude

Máté Galambos the fit-out provisions well in advance and therefore, close cooperation with tenants is of the essence. Concerning demand, sustainable projects are

more future-proof; in my opinion, it is the older generation stock that will suffer in the current climate.

Máté Galambos Director of leasing Atenor Hungary The figures in the office market are inflated due to several owner-occupied developments being completed and

Gábor Borbély projects slipping forward; therefore, delivery will be around the 200,000 sqm mark. The level will fall in 2023 and 2024. In general, developers are not undertaking new projects due to the uncertainty caused by the war in Ukraine and the energy crisis. Finance is also hard to access, as banks act cautiously even for projects with a solid business plan. Therefore, there is a wait-and-see attitude until possibly next spring, when the conditions may change. There are opportunities for small niche projects and quality refurbishments.

There is a big catch-up ongoing in the industrial market, with around 400,000 sqm of space due to be delivered in the Budapest area. The pre-lease ratio is high, but there are bottlenecks in the construction process, for example, the availability of materials. Development has also spread to the countryside,

to cities such as Miskolc, Debrecen, Székesfehérvár and Kecskemét.

Retail is limited to developments where it forms part of a wider mixeduse project or smaller regional retail complexes with a significant hypermarket component. Shopping mall development is essentially limited to the refurbishment of existing centers.

Gábor Borbély Director of research and business development CBRE Hungary Most probably, both demand and, subsequently, supply in the market will decline in the following months.

Developers will only undertake new projects where cash flow projections confirm the long-term profitability of the planned development. I expect that, in the short term, many planned projects will fall short financially, and they are going to be postponed or suspended.

The development process is facing several problems: the war with Russia dragging on in neighboring Ukraine, soaring construction and utility costs,

Tamás Ádány high inflation, the quick devaluation of the forint to the euro and U.S. dollar, and the fear of a recession and an economic downturn. It is not looking good now.

Developers and asset holders inevitably should turn to their actual portfolio and try to make the best of it. Redevelopment can be an excellent answer to the current challenges. For example, Horizon Development has just started redeveloping the former Henkel HQ building. By the end of the first quarter of 2023, it will open as Villányi Gardens offering flexible, quality and reasonably priced office spaces in an already popular and up-and-coming Buda location.

Tamás Ádány Business development director Horizon Development With regard to an exit strategy for developers, investors are exercising caution when it comes to Hungary due

Péter Takács to concerns over inflation, the falling value of the forint, the prospect of rising interest rates, and the war in Ukraine.

Deals are on-hold in the office and industrial sectors, and, at the same time, investors are adopting a cautious waitand-see approach.

Developments, in general, now take two to three years to get off the ground to produce assets that provide investment opportunities. There is interest from investors in logistics, and in development land from logistics developers. For hotel developers, now is a good time to purchase standing assets for value-add investment.

Major domestic investors and developers such as Adventum, Futureal, and Wing have been looking abroad due to the limited possibilities in Hungary and the greater choice elsewhere. Concerning financing, banks are changing their lending conditions, making it more difficult for buyers to obtain finance, even for a standing asset.

Péter Takács Partner Newmark VLK Hungary

ZenGarden, in Harmony With the Environment Using the latest technology can save a lot of energy, and there is no question anymore that any type of energy development is an excellent long-term investment. The combination of environmentally conscious thinking with innovative interior design solutions can thus provide not only favorable financial conditions but also unique working environments.

ZenGarden Office Building’s EUR 2.5 million investment is focused on meeting these needs.

Today, it is hard to find an energy investment that does not generate a return in a few years. Upgrading heating, modernizing HVAC systems, and replacing lighting are the cornerstones of energy efficiency.

In addition, the energy used to heat, cool and light buildings accounts for 28% of the world’s total carbon emissions, so whatever your approach, environmental and sustainability considerations are a first-round requirement from the drawing board.

Excellent Rating for ConvergenCE Office Buildings Among the properties acquired and repositioned

by ConvergenCE, and refurbished with stateof-the-art technologies, CityZen and Kálvin Square Office Building have both received Breem Excellent certification this year, while ZenGarden has previously achieved the most significant environmental accreditation. The recent improvements to the building, which benefits from

an excellent location in Buda, have included several green solutions. ZenGarden has been given modern awnings and sun-reflecting glass facades on the outside. The interior features an energyefficient four-pipe fan-coil heating and cooling system, low-energy LED lighting and a new computerized building management system.

Focus on Harmony, Body and Soul The design phase, which focuses on ideal work environments as well as physical and mental refreshment, also included the modern use of internal open spaces. The unique atmosphere of the rock garden and the fire-resistant, water-permeable and maintenance-free artificial grass does not require energy-intensive maintenance. Those who like to play petanque in one-on-one, two-on-two, or even threeon-three settings can pass their lunch break with a game and a little exercise in the garden. A great way to build community, this French ball game has become a popular form of recreation among employees.

Those who prefer a sportier lifestyle can also use their own or rented bikes. There is a cycle path leading to the office building, a MOL Bubi parking facility in front of the ZenGarden, and a secure bike storage area inside the building for safe and convenient use of bicycles. On warmer days, cyclists do not need to feel uncomfortable during

zengardenirodahaz.hu zengardenirodahaz.hu

the day either, as the changing rooms and showers can make their working days more comfortable.

The building offers services on nine levels; the four lifts make it easy and time-saving to get from the parking facilities to the top floors that offer panoramic views of Parliament. The garage level provides 170 parking spaces and an intelligent building management system for tenants and their guests, with particular attention paid to electric car users.

Perfect Location, Surroundings to Suit all Needs World Mental Health Day has been celebrated on October 10 since 1992, so it’s not without reason that many people call October the month of mental and spiritual health. Taking care of emotions, well-being and inner harmony daily has become a responsibility not only for individuals but also communities and service providers. A physically and mentally invigorated person can do more creative and better-quality work. Designing the interior of office buildings, optimizing their features for users, and making them peoplefriendly is, therefore, an important task.

In addition to excellent transport links, Margaret Island, Millenáris Park, and Mechwart Liget are all within easy reach. Those who want to do sports outdoors or just walk, move and relax can quickly get to some of Budapest’s most beautiful green areas on foot. The Mammut shopping center and several

renowned restaurants and cafés are also nearby, but everyday necessities such as grocery stores, the post office, and other service providers are also within a short walking distance. There are a number of exercise studios, yoga centers, and gyms in the surrounding streets, so recharging before or after work can be done easily. The harmonization of an excellent location with the quality of ZenGarden’s services makes this office building unique.

“The Energy Efficiency Obligation Scheme (EEO) is helping to save energy on the corporate and residential side, but we are committed to using our own resources to support green processes and environmental protection,” summarizes Dóra Papp-Vas, leasing director at ConvergenCE. “We attach great importance to supporting the energy efficiency plans prolonged by the government this summer or the Budapest municipality’s efforts to protect the climate and the environment. That’s why we furnish our office buildings with the latest equipment and technologies. Building trust with our partners and developing a reliable, long-term relationship is of paramount importance to us, and providing the best services is essential to this. It is especially gratifying when the best rating systems recognize our efforts and work,” Papp-Vas adds.

12 | 3

Special Report

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Developments Delivered Amid Rising Market Concerns Although there are substantial pipelines in the office, logistics, and even the hotel markets in Hungary, questions remain about demand, the ability to source finance, the construction process, rising energy and labor costs, and the availability of an exit with a sale to an investor.

GARY J. MORRELL

market by established market players that are attracting substantial preleases, albeit the letting process is more prolonged, according to developers.

Atenor has concluded a 16,000 sqm prelease with E-On for the first phase of BakerStreet, due to be completed in the first quarter

of

2024.

A further 24,000 sqm phase of the project is due for completion late that same year. TriGranit has completed the 21,600 sqm first phase of the Millennium Gardens, with the project already more than 90% let, it says.

However, no new projects have been announced by the relatively small pool of international and local developers operating in Hungary, reflecting concerns over demand, the ability to conclude substantial The first phase of the Millennium Gardens office development preleases, and to source debt finance

by TriGranit has been handed over. It will constitute the final on favorable terms if needed. section of the mixed-use Millennium City project.

The boom in industrial and logistics continues unabated, both in the Greater Budapest area and provincial hubs; the The various real estate sectors are Hungary as an investment destination sector is an undoubted winner in the being impacted by these issues to due to the war in Ukraine, inflation, and post-pandemic environment. different degrees. All are also facing the falling value of the forint.

The first two warehouses developed the challenges of the broader economic There are several ongoing phased by the industrial developer, HelloParks environment, including sentiment about developments in the Budapest office (established a couple of years ago and

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3

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Hotel Pipeline

A substantial hotel pipeline has been traced in Budapest by consultants, although there needs to be an element of caution here as several are on hold with no definite completion dates.

However, hotel projects are being delivered with operators in place.

One such is the upper mid-scale, 123-room A52 Hotel Octogon in the historical center of Budapest, developed by CD Hungary and operated by the Continental Group.

The luxury 71-room Radisson Collection Basilica has been completed and is due to open in a few months, opposite the tourist landmark of St. Stephen’s Basilica.

Futureal officially opened the 55,000 sqm Etele Plaza shopping center a year ago after a frequently postponed development process.

It was the first Budapest mall delivery in several years, and no new centers are planned.

The retail sector faces the dual threat of e-commerce and concerns over the cost of living (and therefore spending power), a common theme across Central Europe, where few shopping centers have delivered in recent years.

Redevelopment is currently the central element for retail in Budapest as owners look to reposition their assets by updating the design and tenant mix.

Multi Corporation has completed

the

EUR 18 mln

refurbishment of the Allee mall, and developer-owners Wing and CPI have undertaken substantial redevelopments of their own respective retail assets.

Asset owners in the office sector now have to provide more highly specified, efficient and sustainable products offering flexibility in the provision of space to attract tenants and cater to staff needs in terms of amenities, location and transportation.

“PM [property management] and FM [facility management] came into focus during and post-COVID,” comments Tamás Ádány, business development director at Horizon Development.

“Now, the record high energy prices put even more emphasis on proper PM and FM. Service charges and the quality of management are going to (or already have) become important factors in tenant decisions,” he adds.

Sustainability accreditation to the Breeam and Leed systems and increasingly the interior and staff health-oriented Well are the norm for a commercially successful development or standing asset in the office market that adheres to increasingly stringent sustainability regulations.

“On the one hand, regulations are stricter; on the other hand, and more importantly, tenants, investors, and

banks (virtually everybody) puts sustainability on the top shelf. There is no future for non-sustainable new developments,” adds Ádány.

Energy Focus

Concerning the international energy crisis, energy efficiency accounts for 30% of the total points of Leed, and 20% of Breeam, according to Edina Hornok, head of the sustainability consultancy at the DVM group.

Such expectations are now extended to the industrial, hotel and retail sectors. In industrial, for example, a major concern of tenants is energy usage. HelloParks is developing the phased 354,000 sqm HelloParks Páty megapark close to Budapest.

The first “Big Box type hall” is being developed

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in accordance with the sustainability requirements for “Outstanding” certification in Breeam’s “New Construction” category, says Rudolf Nemes, CEO of HelloParks.

At the end of the development cycle, building owners and developers need to adopt a longer-term sustainable strategy to have the option of an exit strategy with a sale to an investor.

INSIDE VIEW

Energy Cost Hikes to Have Significant Impact on Tenancies, Affect Landlords and Tenants dr. Zoltán Nádasdy

Managing partner

Noerr and Partners Law Firm

The drastic and rapid increase in energy costs will significantly impact tenancies, affect-ing landlords and tenants.

Landlord’s Perspective

For landlords, the increase in energy costs could have a direct impact in three areas: (i) temporarily vacant premises (including premises not yet let), (ii) common areas, and (iii) leased premises where the tenant has no direct contract with the utility service provider; hence the invoices are prepaid by the landlord.

“On the one hand, regulations are stricter; on the other hand, and more importantly, tenants, investors, and banks (virtually everybody) puts sustainability on the top shelf. There is no future for non-sustainable new developments.”

(i) Vacant Premises Since the costs of vacant premises remain payable by the landlord, it is in the landlord’s interest to keep vacancy rates low and the duration of any vacancy as short as possible, as this reduces the property’s economic viability for the landlord.

“Investors need to think of their future exit; outdated assets are and will be more difficult to dispose of; therefore, the market is definitely shifting towards a more sustainable mindset,” comments Máté Galambos, leasing manager at Atenor Hungary.

The company follows a policy of developing phased office projects and selling individual assets on to investors once completed and leased.

ESG and EU taxonomy reports are now expected to be part of the information pack by some investors when presented with an acquisition opportunity, says Benjamin Perez-Ellischewitz, principal at Avison Young Hungary.

In the current uncertain economic and financial environment, investors and vendors are adopting a wait-andsee attitude to investment, and the total volume for the year is not expected to be above EUR 1 billion.

The future is clear; developers will need to offer ever more well-conceived and sustainable products to gain finance, let and sell a property.

(ii) Common Areas The energy costs incurred in common areas, along with the costs of other services relat-ing to those areas (reception services, etc.), are typically charged by the landlord to the tenants at the end of the year in question.

To minimize the prefinancing of these costs by the landlord, an estimated advance pay-ment for service charges is collected from the tenant. The advance payment is set by the landlord at the beginning of each year and remains the same throughout the year.

In the absence of an express provision in the lease, the landlord cannot change the ad-vance payment during the year. This means that landlords now have significant prefinancing requirements due to the current drastic change in the actual costs versus the ad-vance payments estimated and set for 2022. The risk of settling these prefinanced amounts at the beginning of 2023 will also increase since the collateral for the tenant’s

payment obligation is typically set as the actual (i.e., 2022) amount of the rent and ser-vice charge advance.

To mitigate the landlord’s risks and costs, the advance payments can be increased now by mutual agreement if the tenant is willing to do so.

For landlords that have not done so, it is advisable to include a clause in all future leases stating that they can unilaterally increase the service charge advance payment in the event of a significant change in any circumstances. (iii) Prepaid Energy Consumption If the landlord and not the tenant has a direct contract with the utility providers, the land-lord will pay the incoming bills and pass them on to the tenant. Due to the increased en-ergy costs, the time for settling these prepayments by the landlord will be decreased, or the landlord will require advance payments for such energy bills.

An indirect consequence of rising service charges is landlords will have to invest in mak-ing their properties more energy efficient to remain competitive; otherwise, tenants may seek alternative properties with lower service charges.

Tenant’s Perspective

As a direct result of the increase in energy costs, tenants’ costs will increase significantly: rents, service charges and collateral will go up. The service charges in specific properties may even exceed the rent.

All rents are likely to rise at the beginning of 2023 since leases typically contain an index-ation clause allowing the landlord to increase the rent each year based on the actual change in the consumer price index.

Based on standard provisions in leases, the collateral (security deposit or bank guaran-tees) provided earlier by the tenants will also need to be adjusted at the beginning of 2023 since the collateral is tied to the level of applicable rent and service charges.

In these circumstances, tenants will rationalize and save costs where possible: they will review whether they can take less space (where possible, even using a combination of office-based and remote working).

In such cases, the vacated space may be sublet if the lease allows this or if the landlord explicitly agrees.

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part of the Futureal Group), are now 100% occupied after a period of a few months, according to the developer.

As a result, the company says that the total gross leasable area offered by the HelloParks portfolio will increase to 160,000 sqm by the end of the year.

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Budapest Business Journal | October 21 – November 6, 2022

Record may Fall, but Restrained Activity Prevails in the Office Market Few office developments are expected to be undertaken in the near future as supply and demand in the Budapest office market is expected to fall.

However, there is a robust immediate pipeline as developers have carried on with existing projects, despite geopolitical and economic concerns and rising development and energy costs.

GARY J. MORRELL

The overall vacancy rate for Budapest has increased and now stands at 11%. However, this varies considerably between 4.6% in North Buda and 36% in the periphery, reflecting the importance of location in the current market.

“Development activity remains strong in Budapest despite elevated inflation pressures and the weak forint,” comments Orsolya Hegedűs, head of advisory and research at Cushman & Wakefield Hungary. “While some developments have been delayed until the third quarter, the new pipeline in the second half of 2022 is estimated to exceed 240,000 sqm,

49% of

which is already pre-let. New supply for 2022 will likely break the record set in 2009,” she adds.

Gábor Borbély, director of research and market development at CBRE Hungary, puts office delivery for the year at a Artist’s rendering of the BakerStreet project by Atenor. lower 200,000 sqm, as some projects A 16,000 sqm prelease with E.On has just been agreed for the are owner-occupied and, therefore, do now fully let first phase, due to be completed in Q1 2024. not add to available stock. He expects 170,000 sqm for 2023 and even lower delivery for 2024.

Developers express confidence that tenants Total supply in the Budapest office Although working habits have changed can be found and preleases concluded, market has surpassed four million sqm, during COVID and in the immediate although, with hybrid work practices now according to the Budapest Research Forum post-pandemic period, the office is still the norm, tenants could require smaller (BRF), which comprises CBRE, Colliers regarded as having a central role in spaces. Even so, the office market could International, Cushman & Wakefield, Eston business life, with companies adopting a record an annual record supply.

International, JLL, and Robertson Hungary. hybrid working model.

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“As many as 60% of office workers want a hybrid work model, with 55% having previously worked in this manner. The pandemic has introduced revolutionary changes in the way we work, forcing companies to rapidly adapt to this shift in working patterns,” says consultancy JLL. Tamás Ádány, business development director at Horizon Development, argues that there is a lot of uncertainty as not even tenants themselves know their own office space needs for the next five years.

“They want great flexibility (sometimes expansion and break options simultaneously), but the risks associated with providing this extent of flexibility are unrealistically high for developers and owners,” he said.

Year-long Negotiation

In one significant deal, Atenor has concluded a 16,000 sqm prelease with E.On at the now fully let first phase of its BakerStreet development, due for completion in the first quarter of 2024. Another 24,000 sqm phase is slated to be completed in late 2024.

According to the director of leasing, Máté Galambos, the transaction took one year to negotiate.

In its latest delivery, the prolific Hungarian and CEE developer, TriGranit has completed the first 21,600 sqm phase of the Millennium Gardens office project overlooking the Danube in

District XI. The complex is more than 90% let, according to the firm.

“It is always a pleasure to open a new office building, but Millennium Gardens is unparalleled for us, as the building is the final element of Millennium City Center. The opening of Millennium Gardens, especially in these turbulent times, is an outstanding accomplishment from the TriGranit team,” said Tom Lisiecki, CEO of TriGranit, at the official handover.

The complex was designed by Hungary’s Finta Studio and was planned in accordance with Breeam “Excellent” and Access4You “Gold” accreditation.

The Millennium City Center follows the concept of a “city within a city,” containing cultural institutions, offices, residential buildings, green areas, and a

1.5longkm-

promenade surrounding the buildings.

With regard to the quality of stock across Central Europe, regional and national developers such as Atenor, Codic, CPI, GTC, HB Reavis, Horizon Development, Skanska, and Wing have common sustainable development policies across their portfolios.

This results from a combination of market pressures, sustainability regulations, and tenant expectations exerting influence on developers and building owners. Developers are employing leading Hungarian

and international architects and interior designers to deliver ever more imaginative projects.

Well, the human-centric accreditation system dedicated to interiors, is increasingly being utilized in the highend office sector as developers must react to changing working practices, how space is used, and increasingly stringent sustainability regulations.

Dual Accreditation

Skanska, Futureal, and Horizon Development are committed to developing their projects in line with Well accreditation in addition to the more established Leed and Breeam systems. Advance Tower, built by Futureal and sold to the Erste Open-Ended Euro Real Estate Investment Fund, is the third office complex in Budapest to be awarded Well accreditation; both its 12,000 sqm and 8,000 sqm phases achieved “Gold” certification.

Futureal has also delivered the 38,000 sqm second and third phases of Budapest One in District XI. The occupancy rate already exceeds 70%, according to the builder. The complex is pre-certified with Well “Platinum” and Breeam accreditation.

Another developer, Skanska, has achieved Well and Breeam “Platinum” pre-accreditation for the recently topped-out first 26,000 sqm phase of its 67,000 sqm H2O complex

Special Report | 15 in the Váci Corridor. The EUR 65 million project will consist of three interconnected buildings designed by the Danish Arrow Architects Studio.

An alternative development option is for the redevelopment and renovation of existing buildings, notably in the central business district, where there is a scarcity of building plots and many listed buildings in need of renovation.

Europa Capital has purchased the

12,500 sqm Academia

office center in partnership with ConvergenCE as its asset manager and will undertake an extensive renovation.

“With our investor partners, we buy under-positioned buildings in great locations, which we renovate and refurbish with state-of-the-art technology and services, then reposition and re-let,” explains Csaba Zeley, managing director of ConvergenCE. “We pay great attention to ensuring that all of our properties have the highest environmental ratings, so we are pleased that the CityZen Office Building was awarded the Breeam ‘Excellent’ rating, and the Kálvin Square Office Building received the same rating,” he adds.

In another redevelopment project, Horizon Development has just started renovating the former Henkel HQ building; by the end of the first quarter of 2023, it is due to open as Villányi Gardens.

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Budapest Business Journal | October 21 – November 6, 2022

Refurbishments and Mixed-use Dominate Retail Market The last edition to the Budapest shopping center market was the 55,000 sqm Etele Plaza by the Hungarian developer Futureal, which opened a year ago.

Before that, there had not been a delivery to the market in several years.

GARY J. MORRELL

“The three major forms of retail development are as part of mixed-use projects, regional retail centers and refurbishments of existing shopping centers,” comments Gábor Borbély,

In the latest such refurbishment, the retail asset manager Multi Corporation, acting as center manager and designer, has completed the EUR 18 million refurbishment of the Allee Shopping Center by what it says is enhancing the “interior and exterior design and investment in sustainability to pave the way to carbon neutrality.”

The complex has received Breeam “Outstanding” accreditation following the renovation. Allee is owned by Allianz Real Estate and an investor represented by CBRE Investment Management, who started the refurbishment works

in

2020.

As part of the work, the food court has been extended with more restaurants and cafés added.

The Allee shopping center in Budapest, “The renovation has been refurbished at a cost of EUR 18 million. transformational, and Multi Corporation did a great job creating an enjoyable experience for customers while at the same time improving director of research and business development in Budapest. Owners are energy efficiency and reducing development at CBRE Hungary. striving to update their assets to meet carbon emissions in the shopping No other centers are planned in the modern demands from consumers, center,” commented Philippe Brand, immediate future in Budapest, meaning emphasizing rebranding, redesigning senior portfolio manager at CBRE renovation of existing malls is currently and upgrading the tenant mix. More the central element of shopping center sustainable elements are also being added. Investment Mangement.

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Allee is in District XI, located close to Etele Plaza, and the two centers could be seen as being in direct competition as they are a short tram ride or drive apart.

Complete Restructuring

Wing has undertaken what it describes as a complete restructuring of its EuroCenter in Óbuda, now rebranded as the GoBuda Mall.

According to the developer, the 25,000 sqm center now offers 100 stores and a service function. The interior and exterior have been completely renovated and a green roof has been added. A 140-meter passage has been developed to house fashion outlets.

The company emphasizes the natural light penetrating the center through modernized roof windows.

Another established developer, CPI Hungary, has refurbished the 40,000 sqm older generation Campona shopping center on the outskirts of Budapest, adding new tenants and putting entertainment at the center of the retail experience, as it describes it. Another project will see the 40,000 sqm Atana complex in Budaörs renovated by 2023.

Outside of Budapest, another component of retail development can be found in retail parks with a hypermarket or a significant food element. In a major recent investment transaction, Adventum acquired 273,000 sqm of space in 18 properties ADVERTISEMENT

anchored by Tesco stores across Hungary and the Czech Republic.

There is currently around 2.7 million sqm of retail park space in Hungary, with a pipeline of a further 72,000 sqm, according to Cushman & Wakefield.

Immofinanz has a portfolio of

14 retail

parks in Hungary under its Stop Shop brand name, three of which are located in Budapest. “We aim to create neighborhood centers with a catchment area of 30,000-150,000 sqm,” says the developer and property manager.

One further development possibility is for street-front retail as part of mixed-use or office complexes. The Szervita Square Building in the historical center of Budapest has a high retail element. The centrally located Emerald Residence by Biggeorge has a retail component in addition to residential units and a boutique hotel.

Budapest’s high street retail totals 78,000 sqm with a 3,000 sqm pipeline, according to Cushman & Wakefield. The BudaPart mixed-use complex, creating a new quarter on the banks of the Danube, includes a significant street-level retail and service element alongside office, residential and leisure elements.

Breath of Fresh Air

Given all of this, there is little wonder that analysts saw the EUR 300 mln Etele Plaza as a welcome freshening of

Special Report | 17

the Budapest shopping center market back in 2021. The indications are that despite the rise of e-commerce (online penetration is expected to rise to 14% of retail activity according to Euromonitor), Hungarians in large part still prefer the experience of shopping in a physical environment if the project meets their needs in terms of design and amenities.

shopping centers in the organization.

The complex is part of a mixed-use development on a brownfield site with easy access from residential areas, similar to the Corvin Promenade development elsewhere in Budapest, also by Futureal.

Cushman & Wakefield puts the total modern shopping center stock in Budapest at

“The three major forms of retail development are as part of mixed-use projects, regional retail centers and refurbishments of existing shopping centers.”

which is low by European standards.

The consultancy has further traced a grand total of 1.3 million sqm of mall space across the whole of Hungary.

The leading Budapest centers are generally considered to be the Allee (47,000 sqm), Arena Plaza (66,000 sqm), Árkád center (68,000 sqm), Mammut (58,000 sqm), MOM center (30,000 sqm), and Westend (45,000 sqm).

Many of these have changed hands since completion, and center owners are planning or have undertaken renovations of what are often earlier-generation centers illequipped to meet the requirements of shopping malls in a post-pandemic environment. A need to better address today’s shopper needs is only brought into sharper focus by the emergence of online retail as a rival to bricks and mortar outlets.

The Etele complex includes around 180 retail, entertainment, and service outlets, including restaurants, cafés, a multiplex cinema, a gym, and 1,300 parking spaces. It is located at a transport hub at the meeting point of Kelenföld Railway Station, Metro line 4, and the approach section of the M1 and M7 motorways.

The development is certified “Very Good” by Breeam, and Futureal is hoping for Well accreditation, although there is currently no provision for

around

820,000 sqm,

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Budapest Business Journal | October 21 – November 6, 2022

Skanska Designing a Future Built on ESG Principles The Budapest Business Journal spoke with Aurelia Luca, executive vice president of operations for Hungary and Romania at Skanska’s commercial development business unit, about prospects for the Hungarian real estate market, how it compares with Romania, the future of how and where we work and sustainability in the here and now.

ROBIN MARSHALL

BBJ: What projects are Skanska working on in the Hungarian market now, and what is in the pipeline regarding new investments?

Aurelia Luca: The development of the first phase of our 10th project in Hungary, H2Offices, is nearing the finish line, with completion scheduled for this year. This will be an office complex in the heart of the Váci Corridor, offering an excellent location and in the direct vicinity of a public transportation hub.

The first building provides almost 27,000 sqm of leasable area and consists of eight floors and three underground parking levels. Traditional Scandinavian design principles and environmental consciousness are at the concept’s core.

Employees will be able to relax and work in the 5,000 sqm landscaped garden with ponds, which will also be open to the public, serving as a meeting place for community life. The first phase offers a rooftop running track with an amazing view over the city, accessible to the building’s users. Energy efficiency, smart water management, lots of natural light, and bicycle-friendly facilities all ensure environmental awareness and the well-being of tenants. The development aims for Leed, Well, Well Health-Safety, and Access4You certifications.

Talking about pipeline, we have strong plans and we aim to strengthen even more our presence in Budapest.

BBJ: Energy costs, in particular, are focusing ever more attention on sustainability. How is Skanska placed to hit its carbon neutrality goals? Are you considering accelerating these at all?

AL: At Skanska, we have many years of experience taking measurable actions for sustainable development; it is at the core of our operation. We have very strict rules and ambitious goals to become carbon neutral. Our plan to do so has produced results that exceeded initial expectations. Today, at the group level, we have achieved more than 46% emission reductions in current projects, which has motivated us to create an even more ambitious target. We now aim to reduce our carbon emissions by 70% by 2030 and to move towards net zero in our operations and supply chain by 2045.

Our climate target is accredited by the Science-Based Targets initiative (SBTi), which confirms that the company is contributing to achieving the Paris Aurelia Luca, executive vice president of operations for Agreement goal of keeping global Xxxxxxxxxxxxxx Hungary & Romania, Skanska Commercial Development. warming at 1.5ºC. The progress we are making in reaching our targets has gained international recognition; we BBJ: What are the prospects for the that it has reshaped employees’ have been included in the Financial Hungarian real estate market, and how expectations and attitudes toward Times and Statista “Climate Leaders” list does this compare with Romania? office work. The office will continue ranking 4,000 companies according to AL: Although past years brought to be an essential part of working life; their carbon emissions. Another recent valuable lessons, we went through a new developments need to make it recognition is “The ESG Real Estate pandemic and now face geopolitical easier to share experiences and find a Leader of The Year” for Central and and energy-related turbulences. Yet the work-life balance after a period that Eastern Europe at the Eurobuild Awards.

CEE market has proved to be resilient blurred the boundaries between the Our office buildings are designed so far. Hungary and the CEE region two; this trend is visible in all the CEE and built taking into account ESG remain investment destinations that countries we are present. We expect principles. Take H2Offices, for example: during the development phase, we took offer attractive yields and a variety of employees increasingly to return to great care to ensure that 95% of the premium assets. Investors are looking the office, but at the same time, the waste generated during construction for core commercial property products to need for flexibility is vital and offices is being recycled and reused. Moreover, protect value for money over time in the have to address such expectations we used concrete and facade elements context of rising inflation. by offering solutions that combine with low CO2 emissions. H2Offices Office development remains one traditional and flexible workspaces. is a nearly zero building in terms of of the sectors dominating both the At the same time, when it comes energy efficiency (which means that it Hungarian and Romanian markets. to the design and features that we uses energy within a limitation defined Similarities between the two countries integrate into our projects, even by local legislation) and complies also exist when looking at perspectives before the pandemic, these were with EU Taxonomy climate change on offices. Following the pandemic, on well-thought-through to answer the mitigation. We save almost 40% of water the one hand, we observed a tendency evolving working habits of our users. in accordance with Leed certification for more companies to use their Luminous and welcoming lobbies requirements, and rainwater is collected workspaces as one of the tools to attract with a multitude of functionalities, to reduce potable water consumption. employees back to the office. On the including spaces for work, a library The building is also designed to allow other hand, rising energy and utility area for reading, and a cozy fireplace the most sunlight into the office areas. prices may also encourage employees to for a warm drink. Outside, we focus work from the office. on creating generous landscaped We are happy to see more companies gardens for residents to relax and enjoy BBJ: Related to that, do you expect ESG-compliance rules to be tightened paying increased attention to the fresh air. further? Is the push from regulators or minimizing their environmental impact the demand from investors and tenants and closely looking at energy efficiency BBJ: We are in a market characterized the more significant factor in ESG? because it means we can join forces for by rapidly rising raw material, labor AL: Continuous interest in ESG the same big scope. To give just one and energy costs. How does Skanska standards shows that they will determine example, in our last delivered building, manage these? How much do you the market shape in the near future.

Nordic Light Trio, we save approximately pass on, and how much must you At Skanska, ESG aspects are embedded 50% on energy yearly, compared to a just swallow? in our projects’ entire lifecycle, starting conventional office building, due to the AL: All markets are experiencing high from purchasing land through selecting carefully selected solutions. volatility. The immediate impact on building materials and sustainable the entire real estate industry means design, installing climate and userBBJ: How have Skanska’s projects challenges in materials delivery friendly fit-out, and ensuring efficient changed during the pandemic? How do and increasing energy prices. operations. Tenants are willing to you see the balance between working We have pre-ordered most of the align to ESG criteria, which is among from the office, home or hybrid? materials for our projects, controlling the top requirements on their list, and AL: The pandemic didn’t have such risks and ensuring that we operate ESG-proof developments will become significant effects on our projects. according to the established schedules the long-term standard.

However, our recent research shows and deliver what we promise.

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Budapest Business Journal | October 21 – November 6, 2022

PRESENTED CONTENT

CPI: Developer Has a Duty and a Responsibility to the Human Workforce The Budapest Business Journal spoke with Bea Déri, director of PR, marketing & design of CPI Hungary, about putting the human occupants of office buildings first, the drive for sustainable solutions and services, adding value to older buildings, and finding the balance between working from home and the office.

ROBIN MARSHALL

BBJ: As an owner-operator, CPI’s core assets and structures of concrete, glass, bricks, and stone, but at their heart are people. Where does the balance of responsibilities lie between the builder, owner, operator, and tenant regarding the human dimension?

Bea Déri: It is important to note that human innovation and the related term, human design, are not new phenomena.

facilities accessible. We were the first in Hungary to get certified by Access4You. The company audits premises from the viewpoint of people with special needs, proposes improvements where necessary, rates the result of the audit, and provides a European certification for qualifying buildings.

BBJ: Given the increasing importance of sustainability, both from a regulation standpoint and from the demands of tenants and their staff, how is the balance tipping toward adding value to existing buildings rather than building new ones?

BD: We have always believed in longterm value creation. Indeed, value preservation is one of our main strategic objectives. This means that, in recent years, we have repositioned our older buildings based on a human-centered criteria system. In parallel, our excellent colleagues have examined the structures from an operational point of view. We have managed to carry out efficient building management improvements in our properties, as a result of which we reduced CO2 emissions and water consumption, and we are in the process Bea Déri, director of PR, marketing & design. of switching to 100% renewable energy sources by 2024.

The owner-operator always has the duty and responsibility to examine whether the human workforce using the building can operate efficiently in a particular environment. It is not enough to create beautiful and impressive spaces; those spaces must be assigned functions that help people’s efficiency. This guiding principle drives us whether it is about repositioning an existing office building or a new development. We believe that the well-being of the users and the inspiring environment created for them is one of the means of achieving tenant satisfaction. We genuinely believe in human- and experience-oriented environmentally friendly buildings.

BBJ: How much of what CPI does is your innovation, and how much is demand-driven from the tenant side?

BD: You can’t measure the ratio in numbers. From the tenant side, there is an increasing demand for human innovation efforts. In many cases,

Arena Corner

we learn from our tenants and their initiatives toward their employees.

The range of services the office building provides to our tenants is also important from an HR point of view, and can even help their internal motivation system.

BBJ: What are the trends now on work from the office, work from home, and hybrid? Do you expect this to evolve further over time?

“We spend a lot of time in our workplaces; therefore, it is essential to have possibilities and space to recharge ourselves.”

Many years ago, we realized that creating a human-centered working environment and maximizing wellbeing at the workplace plays an essential role. To facilitate all this, CPI Hungary developed and implemented the Human Innovation Program (HIP) in our innovative office buildings in Budapest.

The HIP concept aims to make available services that facilitate everyday office life to the tenants of an office complex.

The various elements of the service package help staff preserve their wellbeing, take care of their day-to-day needs and brighten up the usual office routine. We always keep the following motto in mind: “We spend a lot of time in our workplaces; therefore, it is essential to have possibilities and space to recharge ourselves.”

BBJ: What third-party certification do you seek, and why?

BD: The basic requirement for our buildings is green certification, such as Breeam. Besides this, we are committed to making our

Balance Loft BD: Trends change. Due to the current world situation, we cannot think that there are established trends that we can follow. It depends on the tenant how much capacity they offer employees for office work. We see that isolation is not good for anyone if the balance is tipped in favor of working from home. Based on our conversations with our tenants, most do not want colleagues to work mainly from home as, according to them, this comes at the expense of efficiency. What is also relevant for us is to examine the rental properties in terms of areas and function. Spaces and their uses have changed in recent years, employee habits and office space usage habits must also be re-examined.

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Budapest Business Journal | October 21 – November 6, 2022

Energy Efficiency Crucial for a Successful Office Project In the current environment, energy efficiency is becoming ever more critical when letting or selling an asset. The location and services provided are also important and decisive factors, but significantly higher energy costs could force many tenants to move to a more efficient building, argues Edina Hornok, sustainability director at DVM group.

GARY J. MORRELL

“Energy efficiency is only one of many different aspects of the accreditation systems – besides health and wellbeing, material use, or pollution-related issues – but it plays the most important role when assessing a building,” she tells Green Matters.

This article is supported by:

Szervita Square Building by DVM group.

“It accounts for 30% of the total points of Leed, and

20% of

Breeam, although the Well standard does not assess energy efficiency because it focuses on the health and wellbeing of building users,” she said.

Sustainability and financial concerns are seen as overlapping from the perspective of office owners when it comes to energy use. Landlords are forced to reduce energy use to keep tenants, and the measures implemented to achieve this, such as improved mechanical systems or harvesting renewable energy, will also enhance sustainability.

On the role of property management and facility management with regard

to energy efficiency, Hornok sees PM and FM as being responsible for the maintenance and improvement of the building’s components and energyrelated systems.

Proper maintenance (like seasonal commissioning, adjustments or cleaning) can help ensure more efficient operation of the systems.

An Impact Inside and Out

Significantly, energy concerns are also impacting both exterior and interior design when it comes to offices.

“Energy efficiency can be influenced by the building’s shape, orientation, glazed areas or external shading systems, and renewable systems can also be installed on the exterior of a building,” Hornok explains. “The mechanical and lighting systems are visible inside, so the chosen systems will somewhat influence the interior design,” she adds.

Offices can be made more livable for tenants in terms of heating and air quality by creating separate heating zones and installing individual thermal controls for temperature or airspeed to ensure greater comfort. High-efficiency air filters, CO2 sensors, demand-controlled ventilation, and healthy interior materials can all help to improve air quality.

The improvements and percentage of savings that can be achieved through the use of sustainability, energy, and climate consultants vary greatly, depending on the size or scope of the project. DVM, for example, has worked on buildings

where

25-30%

Szervita Square Building interior by DVM group.

Rising energy prices could be regarded as “favorable” to the extent that they force office owners to be more concerned with sustainability and energy efficiency.

of energy savings were achieved with the help of dynamic energy simulation.

Edina Hornok, sustainability director at DVM group “Further, developers are forced to adapt and implement energyefficient solutions in order to attract tenants and be competitive.

At DVM group, we use dynamic energy simulation to assess different building energy concepts and thus support developers to find the ideal, cost-effective solution,” Hornok concludes.

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24 | 3

Special Report

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Industrial and Logistics Development Continues to Boom The industrial and logistics sector boom continues unabated, as demand remains high and vacancy stands at a record low. Analysts see this market as the commercial real estate sector in possibly the most favorable position postCOVID, in Hungary as elsewhere in the region given the growth in e-commerce and light industrial production in emerging provincial hubs.

Construction is underway at the HelloParks Páty project, the developer’s largest to date.

development period is short and demand The first two warehouses developed is high, according to Gábor Borbély, head by HelloParks, the relatively newly of research and business development at established industrial developer that is CBRE Hungary. part of the Futureal Group, are now Colliers puts the total delivery pipeline for 2022 across Hungary at occupied 540,000 sqm, with another 277,000 sqm after a period of just a few months, planned thus far for 2023. A developeraccording to the builder. led industrial market is now emerging in secondary cities beyond Budapest, as has long been the model in the GARY J. MORRELL Czech Republic, Poland, Romania and “The nearly EUR 70 million Slovakia. As a result, consultancies Páty investment will be Established regional industrial now follow growth patterns in both developers and park operators such as the greater Budapest area and other the largest contiguous CTP, Prologis, and VGP are active in Hungarian hubs. warehouse in Budapest’s the market alongside national players Total modern industrial stock in such as the National Industrial Park Hungary stands at 4.3 million sqm, 1.3 agglomeration. […] The Big Operator and Developer (NIPÜF) million sqm of which is located outside Box type, energy efficient, and Wing. They have been joined by the capital, according to Cushman & HelloParks (part of the Futureal Group), Wakefield. Despite this and the strong and environmentally ConvergenCE and, most recently, pipeline, it is still a relatively small stock friendly warehouse is the leading regional developer and

by Central European standards. operator, Panattoni. expected to be handed over Owner-operators Cushman & Wakefield have traced in the summer of 2023.”

The regional park developers and a pipeline for the second half of operators CTP and Prologis are the year at around 365,000 sqm of Hungary’s two biggest owners of industrial and logistics space for The Maglód and Fót developments in industrial stock. With the new Prologis Hungary. If this level of delivery is the Greater Budapest area, which opened Sziget II development, Prologis has achieved, the new supply for 2022 earlier this year, are the first industrial a pipeline of 50,000 sqm of space in could surpass the 2021 record levels. buildings in Hungary to achieve Breeam Hungary for the year.

Vacancy rates remain low despite “Excellent” certification in the “New With Hungary seen as lacking a solid an increase to about Construction” category. In addition to secondary industrial market up to now, Maglód and Fót, a 58,000 sqm megapark Prologis has been concentrating its in Páty is also being developed. development strategy in the M0 area in the Greater Budapest area and 5.5% The company, established almost two around Greater Budapest. The firm is in the countryside. Recent completions years ago, plans to deliver two further developing around 80% of space on a include a 22,000 sqm facility by CTP projects in 2022. As a result, the total gross built-to-suit basis, with the remaining at Üllő in the Budapest area, a 45,000 leasable area offered by its portfolio will 20% speculative. sqm complex for HNTS at Hello Parks increase to 160,000 sqm by the end of the “Over the past year, speculative space Budapest North, and 23,000 sqm for year, representing a total investment of EUR has let very quickly, with the very limited Fiege at the GLP Sziget Logistics Center. supply of industrial space on the market.

190 million according to company plans.

Concerning demand, the prelease ratio In general, projects have a delivery time Largest Project is high and, along with built-to-suit, of 10-12 months from permitting to “The nearly EUR 70 million Páty this is the most popular development completion,” says Zsuzsanna Hunyadi, investment will be the largest contiguous mode. The tendency is for developers director of leasing and customer warehouse in Budapest’s agglomeration,” to add a 50% element to a project as the experience at Prologis Hungary.

6.5%

100%

says Rudolf Nemes, CEO of HelloParks.

It is also the industrial real estate developer’s largest project to date.

“The Big Box type, energy efficient and environmentally friendly warehouse is expected to be handed over in the summer of 2023. The facility is developed in accordance with the sustainability requirement of the ‘Outstanding’ certificate in the Breeam ‘New Construction’ category. The fulfillment of the strictest sustainability criteria fits HelloParks’ ambitions and its ESG objectives to become a significant industry player in creating a carbonneutral Europe,” Nemes adds.

Sustainability accreditation is increasingly the norm for the industrial sector: Prologis is aiming for at least the Breeam “Very Good” level across its Central European portfolio. Likewise, CTP is seeking Breeam In-Use “Excellent” certification for its whole portfolio.

The leading European industrial park operator and developer Panattoni, which had been a notable absence in the Hungarian market in recent years, has secured two

100,000 sqm sites

in the Budapest area. The company has already undertaken construction of its first 17,300 sqm warehouse at Törökbálint, where Panattoni Park Budapest City West is due to complete in the first quarter of 2023.

Given the low supply of assets, the industrial sector is attracting new investors. In a recent logistics transaction, the developer and investor Wing has purchased the Airport City Logistics Park from CPI, located in the neighborhood of Budapest Liszt Ferenc International Airport. The business park contains almost 44,000 sqm of warehouse buildings and buildings and 8,000 sqm of offices in six already functioning buildings, with one other under construction.

Industrial property investments: “The sector that is worth keeping an eye on” During the pandemic, office and commercial property investment declined everywhere, including in Hungary, while industrial property investment reached record levels. This is, on the one hand, due to the increased demand for warehousing and logistics centers because of the rise in online shopping. On the other hand, the Hungarian market — in the industrial segment — continues to offer a predictable and affordable rental product. Demand for industrial investment is also being boosted by investment in the automotive sector, reflecting the related supply and warehousing needs.

Dr. Benedek Kovács, Real Estate Partner at Baker McKenzie, points out that in addition to a technical adviser, the successful implementation of an industrial real estate investment requires the involvement of an experienced legal adviser, who will oversee the process from the selection of the site, through due diligence, to the completion of the transaction.

How has the demand for industrial property in Hungary changed over the past two years?

We saw a significant increase in the number of transactions in industrial real estate such as logistics and warehousing centers and related land acquisitions during the pandemic and the trend has continued since then.

It has become a leading segment within the real estate sector in Hungary, largely due to the country’s infrastructure and favorable rents and the resulting tenant demand, to which the investor market reacted positively during the pandemic. This has had a positive impact on the industrial development land market.

How might high inflation and rising energy prices affect industrial property?

Inflation impacts on almost all industries, but energy price rises are expected to affect industrial properties less than, for example, offices or commercial buildings, as energy requirements for industrial properties are much simpler, green solutions are easier to develop and the range of services that landlords can offer is narrower.

What should an investor look out for and how can advisers help in a transaction?

In general, we find quite strong ideas on both the seller’s and the buyer’s side. In the process, it is the role of the advisers to do the legal due diligence on the target property and facilitate the transaction. This involves confirming whether the proposed industrial investment in the property is feasible.

In the case of land transactions, there is considerable uncertainty at the outset as to whether the property can be built on, which requires technical, legal and environmental aspects to be examined. The legal adviser is responsible for the legal feasibility study and the justification of the need for building regulations, feasibility and rezoning.

The legal adviser also helps when the area to be reclassified lacks a set of building regulations: in this case, we assist in the coordination with the land registry and the municipality. We put in place a transaction structure that allows the investor to buy the land as a finished product, i.e., the property

has an industrial classification, a regulatory plan and, in the best case, a building permit. In a growing number of cases, the latter is missing though: in the current highly competitive environment, investors are increasingly taking the risk of obtaining the building permit afterward.

How much have greenfield investments helped the industrial property market?

The number of greenfield investments has increased substantially in recent times and some of these have implied a demand for industrial real estate.

On the one hand, the standardized authorization procedure for greenfield investments has made the process of acquiring industrial land more efficient and thus this market segment has been expanded with a range of properties that meet the logistical and infrastructural needs of these investors. On the other hand, such investments have also channeled the needs of supply chains into the industrial property market, boosting both the market for land transactions and turnkey industrial investments.

Is there a perceptible ESG (Environmental, Social and Governance) dimension to these transactions?

Indeed, ESG has gained traction since the energy crisis and this is already reflected in the real estate market. Tenants force energy improvements on landlords and such demands will create new bargaining power. This will drive the rental market across all types of real estate. In turn, the rise in construction costs will affect new investments and, within that, turnkey rental projects. On this basis, rents are expected to rise, but within the region, rents are still expected to remain lower in Hungary, which will continue to be a competitive advantage for the Hungarian market.

Benedek Kovács

Head of Real Estate Baker McKenzie Budapest

26 | 3

Special Report

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Economic and Financial Concerns Impact Hotel Sector Although rising tourism and occupancy rates of above 80% saw an investment boom up to 2020, the hotel and hospitality sectors were hit hard by COVID. Now comes the impact of the war in Ukraine on tourism and travel in the region, rising construction, energy and labor costs, growing inflation and interest rates, and increasingly stringent ESG expectations for hotel owners and operators.

GARY J. MORRELL

When Budapest could return to its prepandemic levels of 12 million annual visitors remains to be seen. While individual tourists have returned, notably

years. Without the war in Ukraine, this would likely have been possible, but now everything is uncertain again. I do not think anyone can tell when the recovery is finally going to happen,” he comments.

CEE hotel yields are difficult to estimate in the current environment, given the limited number of transactions concluded.

Further, the hotel market has traditionally been less liquid than, for example, the office sector; hotel investors tend to be more specific in their requirements and deals can be protracted.

Investment transactions concluded in the last few years include two in 2021: the purchase of

the

The restored Dreschler Palace is due to open as a W Hotel, part of Marriott International. from Europe, business travel has not followed suit amid concerns over the environmental impact of air travel and the ability to conduct business online.

Significant questions remain as to whether business travel will ever return to pre-pandemic levels. The MICE (meetings, incentives, conferences, and exhibitions) sector is expected to recover, but slowly; once postponed, large-scale events take a long time to re-arrange.

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Despite the perceived complexities of hotel projects compared to, say, office or industrial, the Central European region has successfully attracted developers and investors from more traditional commercial property sectors seeking long-term partnerships with experienced hotel operators who can provide the expertise needed for the day-to-day operation of the projects.

Many hotel projects are thus at various stages of preparation or construction in CEE, although schedules are slipping in the current uncertain market environment.

Indeed, several projects have been put on hold with no new delivery dates announced.

However, the pipeline remains potentially robust, and discussions on new hotel Potential Bottlenecks investment are ongoing. According to the “While Budapest continues to enjoy hotel, tourism and leisure consultancy strong attention from both international specialists Horwath HTL Hungary, the total and local buyers, the lack of quality pipeline for 2022-2026 is put at about assets in decent locations and limitations in the financing market may hotels slow down the transaction volume,” with around 4,420 rooms. says the global real estate services firm Cushman & Wakefield lists several Cushman & Wakefield. notable hotel projects in Budapest. A recent “The cost of labor has increased delivery is the upper mid-scale 123-room and energy [has risen] by as much as A52 Hotel Octogon in the capital’s historic five or six times. Hotels that have not center, developed by CD Hungary and updated their energy systems will be operated by the Continental Group. in a difficult position. There are delays, Also in the historic center, a fewer planned projects, and banks are Hungarian developer is due to open offering less favorable financing even the luxury 71-room Radisson Collection for quality projects in good locations,” Basilica opposite St. Stephen’s Basilica. says Newmark VLK’s Takács.

Other developments include Eurostars’ “Hotels in the countryside will suffer as five-star, 107-room Aurea Ana Palace their guests tend to be from Hungary and Hotel and the five-star 100-room Grand the domestic economy has been hit by Hotel Savoya by Austria’s EST Hotels. inflation and the weak forint. Most hotels In the mid-range, CPI Hotels is outside Budapest are wellness hotels working on the 3-star M4 Hotel in that require large amounts of energy, central District V, while the Insider and there will be closures and no new Hotel by Three Corners Hotels will development in this sector,” he warns. deliver 75 4-star rooms.

As with other real estate and service sectors, ESG and EU Taxonomy rules A Good Location and adherence to ESG standards Péter Takács, a partner at Newmark VLK are no longer an option but are central Hungary, argues that Budapest remains to hotel investment. a good hotel location, and there are “Very strict transaction reporting opportunities for developers and investors and obligations are coming into force, for projects with strong covenants. and the social and governance element “When COVID started two years ago, of ESG needs to be incorporated into we were among those that predicted that the reporting strata,” comments Barbara the recovery would take three to four Koncz, a partner at KPMG Hungary.

32

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121-key

D8 Hotel and the 50-room Iberostar Budapest by the Hungarian investor and hotel management BDPST Group.

Wing has concluded an agreement with Accor for a 12,000 sqm hotel within its 42,0000 sqm Liberty office development complex in District IX, an emerging business and sports arena district. As previously reported by the Budapest Business Journal, this will be a dual-branded hotel with Ibis and Tribe each operating half of the 332 rooms. The complex is due to be completed in 2023.

In the first half of 2022, EUR 21.5 million in hotel transactions involving European capital was completed, with the purchase of two development sites comprising a projected 502 rooms, according to Cushman & Wakefield.

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3

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Special Report | 29

Real Estate Developers

1

ECE pRojEktmanagEmEnt buDapEst kFt. www.ece.com

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Christoph Augustin, Sandra Brigitte Müller, Dr. Nóra Kismarci, Sandra Ilona Riccardi, Gabriella Szarka, Mária Verebélyi, Ulrich Schmitz – –

1106 Budapest, Örs vezér tere 25/A (1) 434­8200 info@ece.hu

A

Individuals (100) –

Ádám székely Máté Kovács Balázs Czifra

1115 Budapest, Bartók Béla út 105–113.

(1) 481­4530 info@infogroup.hu

majoR CliEnts in 2021

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IGPark Polgár IGPark Kecskemét West, IGPark Karcag, IGPark Tiszaújváros, Bartók Udvar office complex

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Futureal Development Holding Kft. (100) –

tibor tatár David Hendrych Tímea Szili

1082 Budapest, Futó utca 47–53.

(1) 266­2181 info@ futurealgroup.com

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Gobuda Mall (2022), Park West 1 residential park (2022), Magyar Kosárlabdázás Háza (2022), B&B Hotel Budapest City (2021), Metropolitan Garden residential park (2021), Siemens-evosoft HQ (2020), Kassák Residence residential park (2020) Magyar Telekom HQ (2018), Ibis Styles Budapest Airport Hotel (2017)

Magyar Telekom, MKOSZ, eMAG – Extreme Digital, alza.hu, GE, Webshippy

Wingholding Zrt. (100) –

noah m. steinberg – –

1095 Budapest, Máriássy utca 7.

(1) 451­4760 info@wing.hu

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Tibor Nagygyörgy (100) –

tibor nagygyörgy Dávid Farkas Eszter Sallai

1023 Budapest, Lajos utca 28–32.

(1) 225­2525 info@biggeorge.hu

A

Market Építő Zrt. (100) –

Dr. mihály schrancz – –

1117 Budapest, Dombóvári út 27.

(1) 241­0100 iroda@ propertymarket.hu

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– Real estate funds (100)

paweł sapek – Marta Tesiorowska

1095 Budapest, Lechner Ödön fasor 7.

(1) 577­7700 zhunyadi@ prologis.com

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– Quintana Investments Limited (100)

gyula Ágházi Zoltán Lehoczky Orsolya Kovács

1062 Budapest, Váci út 3.

(1) 374­6500 info@ granitpolus.com

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Special Report

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skanska magyaRoRszÁg ingatlan kFt. 10 www.skanska.hu

11

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CoDiC HungaRy kFt. www.codic.eu

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RoseVille - planned opening 2022 Q4, Aréna Business Campus B - planned opening 2023 Q1, BakerStreet I - planned opening 2024 Q2, BakerStreet II - planned opening – 2024 Q4, Aréna Business – Campus C - planned opening 2024, Aréna Business Campus D planned opening 2025, Lake11 Home & Park (residential development) -1st phase planned opening 2024 Q1

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Academia Offices (2023)

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– zoltán borbély Atenor S.A. (90), Adrienn Péter Atenor Group Máté Galambos S.A. (10)

1138 Budapest, Váci út 121–127.

(1) 785­5208 info@atenor.hu

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– Skanska Commercial Development Europe AB (100)

aurelia luca András Péterfy –

1133 Budapest, Váci út 96–98.

(1) 382­9100 property@ skanska.hu

Eiffel Tér office building (2010), CityZen office building (2017), Kálvin Square office building (2017)

CZ Duna Kft., KS Duna Kft., CBC Ingatlanfejlesztő Kft., Akadémia Office Building Kft., Árpád Invest Kft., Canada Square Kft.

(69) (31)

Csaba zeley Balázs Kovács –

1133 Budapest, Árbóc utca 6.

(1) 225­0912 office@ convergen­ce.com

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– Codic Hongrie S.A. (100)

kornél kalapács Hervé Bodin Ibolya Csiernik

1051 Budapest, Szent István tér 11/B (1) 266­6000 info.hungary@ codic.eu

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– CPI Property Group (100)

mátyás gereben Tamás Pók Bea Déri

1138 Budapest, Dunavirág utca 2–6.

(1) 225­6600 hungary@ cpipg.com

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– Globe Trade Centre S.A. (100)

jános gárdai, ariel Ferstman, klára bujdosó, zoltán Fekete Csaba Zovát Edina Magó

1138 Budapest, Népfürdő utca 22.

(1) 412­3680 leasing@gtc.hu

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Raiffeisen Bank, bp; B+N Referencia Zrt. Huawei

– HB REAVIS GROUP B.V. (100)

– – –

1133 Budapest, Árbóc utca 1–3. hungary@ hbreavis.com

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– TG CEE S.á.r.l.

(100)

tomasz lisiecki Bálint Brenner –

1132 Budapest, Váci út 30.

(1) 456­6200 info@trigranit.com

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AIG, Cain International, DEKA, Erste, M7, OTP, Raiffeisen

– White Star Real Estate LLC (100)

krisztián barabás Marietta Biczó Larina Németh

1124 Budapest, Csörsz utca 49–51.

(1) 382­5100 hu.office­bud@ whitestar­ realestate.com

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Eötvös12 (2023), Park22 Business Park I. (2023 Q2)

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Eiffel Square (2011), Eiffel Palace (2014), Váci1 (2016), Promenade Gardens (2018), Szervita Square Building (2020)

NR

–

✓

Agora Budapest

Villányi Gardens (2023), ParkSide Offices (2025)

–

✓

–

–

aDDREss pHonE Email

–

HoRizon DEvElopmEnt kFt. www.horizondevelopment.hu

WHitE staR NR REal EstatE kFt. www.whitestar­realestate.com

–

Krisztina Palace (2010), Green Court Office (2021)

–

gtC magyaRoRszÁg ingatlanFEjlEsztő zRt. www.gtc.hu NR

top loCal ExECutivE CFo maRkEting DiRECtoR

majoR CliEnts in 2021

✓

Cpi HungaRy kFt. www.cpigroup.hu

oWnERsHip (%) HungaRian nonHungaRian

pREviously ComplEtED REFEREnCE pRojECts, yEaR oF ComplEtion

assEt managEmEnt

REal EstatE bRokERaqgE

ConDominium opERation

built-to-suit DEvElopmEnt

REal EstatE utilization

REal EstatE invEstmEnt

ConstRuCtion

pRojECt managEmEnt

poRtFolio managEmEnt

ongoing pRojECts in HungaRy (invEstED valuE in HuF, ExpECtED yEaR oF ComplEtion)

FaCility managEmEnt

aCtivitiEs anD sERviCEs

publiC builDing

inDustRial

inFRastRuCtuRal

REsiDEntial

CommERCial

atEnoR HungaRy kFt. www.atenor.eu 9

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

typEs oF invEstmEnt

oFFiCE

Company WEbsitE

total nEt REvEnuE in 2021 (HuF mln)

Rank

30 | 3

✓

1052 Budapest, balázs Czár Deák Ferenc utca 5.

– (1) 473­1209 Ildikó Rézműves info@horizon­ development.hu

3

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Special Report | 31

Asset Management Companies

1

neo pRopeRty seRviCes ZRt. www.neopropertyservices.hu

2

inFogRoup www.infogroup.hu

3

CusHMAn & WAkeField neMZetköZi ingAtlAn tAnÁCsAdó kFt. www.cushmanwakefield.com

4

Wing ZRt. www.wing.hu

5

M7 CeReF ii. lux HungARiAn pRopCo s.Á.R.l. MAgyARoRsZÁgi Fióktelepe –

25,364 11,219

3,832 A

3,041 A

2,973 A

1,000 A

6

CA iMMo HungARy kFt. www.caimmo.com

874

7

AddvAl kFt. www.addvalgroup.com

813

8

ConveRgenCe www.convergen-ce.com

A

A

457 183

A

A

A

A

A

Bartók Udvar office complex, IGPark Polgár, IGpark Karcag, IGPark Kecskemét South, IGPark Kecskemét West, IGPark Tiszaújváros, IGPark Miskolc

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

A

–

A

45

A

15

A

5

A

35

Portfolio diversification according to ownershiP structure (%) –

100

oWneRsHip (%) HungARiAn nonHungARiAn

top loCAl exeCutive CFo MARketing diReCtoR

AddRess pHone eMAil

100

AKKO Invest Nyrt. (100) –

lászló vágó Tamás Giller György Veres

1095 Budapest, Máriássy utca 7.

(1) 210-0924 sales@ neopropertyservices.hu

–

Individuals (100) –

Ádám székely Máté Kovács Balázs Czifra

1115 Budapest, Bartók Béla út 105–113.

(1) 481-4530 info@infogroup.hu

gergely pados Zsuzsanna Kiss Orsolya Németh

1052 Budapest, Deák Ferenc utca 5.

(1) 268-1288 info.budapest@ cushwake.com

oWned by Clients

oWn pRopeRty

ConstRuCtion site

Hotel

oFFiCe

industRiAl

poRtFolio diveRsiFiCAtion ACCoRding to type oF pRopoeRty MAnAged (%)

RetAil

otHeR

ACCounting seRviCes, ContRolling

pRojeCt MAnAgeMent

ReCeivAbles MAnAgeMent

MAin pRopeRties MAnAged in H1, 2022

tenAnt MAnAgeMent

seRviCes oFFeRed in pRopeRty MAnAgeMent

poRtFolio, pRopeRty And ReAl estAte MAnAgeMent

totAl vAlue oF pRopeRty MAnAged in HungARy in 2021 (HuF Mln)

net Revenue FRoM Asset MAnAgeMent in 2021 (HuF Mln)

CoMpAny Website

totAl net Revenue in 2021 (HuF Mln) totAl net Revenue in H1, 2022 (HuF Mln)

RAnk

Ranked by total net revenue in 2021

A

A

A

✓

✓

✓

✓

✓

–

27

6

63

4

–

–

100

– (100)

A

A

A

✓

✓

✓

✓

✓

–

14

50

33

3

–

A

A

Wingholding Zrt. (100) –

noah M. steinberg – –

1095 Budapest, Máriássy utca 7.

(1) 451-4760 info@wing.hu

dániel benkő – –

1139 Budapest, Váci út 99–105.

– m7accounting@ bpion.com

1,000 10,800

A

A

457

A

Laki Irodaház, Terra Park

✓

–

–

–

–

–

–

55

45

–

–

100

–

– M7 Real Estate CEREF II GP Holdco Limited (100)

Millennium Towers I, II, III, H, City Gate, Capital Square, IP West, Bartók ház, Canada Square, Víziváros Office Center

✓

✓

✓

✓

✓

–

–

–

100

–

–

100

–

– CA Immobilien Anlagen AG (100)

john Mckie – –

1092 Budapest, Köztelek utca 6.

(1) 501-2800 office@caimmo.hu

100

(100) –

Hubert Mühringer Erika Puskás Rita Szabó

1077 Budapest, Wesselényi utca 16.

(1) 479-6135 office@ addvalgroup.com

100

(69) (31)

Csaba Zeley Balázs Kovács –

1133 Budapest, Árbóc utca 6.

(1) 225-0912 office@ convergen-ce.com

A

A

A

Academia office building, ZenGarden office building, CityZen office building, Kálvin Square office building, Árpád Center office building, Canada Square office building

✓

✓

✓

✓

–

✓

✓

✓

✓

–

–

–

20

–

–

15

80

85

–

–

–

–

–

–

otHeR

RetAil

industRiAl

oFFiCe

✓

✓

–

✓

–

–

A

A

A

A A

A

A

A

✓

✓

✓

✓

–

–

46.10

–

✓

✓

✓

✓

A

Real estate asset management, rental, economic and financial facility management, real estate management

–

–

✓

✓

✓

✓

–

–

A

A

AddRess pHone eMAil

oWned by Clients

ACCounting seRviCes, ContRolling

A

Portfolio diversification according to ownershiP structure (%)

pRojeCt MAnAgeMent

A

top loCAl exeCutive CFo MARketing diReCtoR

oWn pRopeRty

ReCeivAbles MAnAgeMent

A

oWneRsHip (%) HungARiAn nonHungARiAn ConstRuCtion site

tenAnt MAnAgeMent

194 32

seRviCes oFFeRed in pRopeRty MAnAgeMent

Hotel

MAin pRopeRties MAnAged in H1, 2022

poRtFolio, pRopeRty And ReAl estAte MAnAgeMent

Ce lAnd MAnAgeMent kFt. www.naiceland.hu

poRtFolio diveRsiFiCAtion ACCoRding to type oF pRopoeRty MAnAged (%)

totAl vAlue oF pRopeRty MAnAged in HungARy in 2021 (HuF Mln)

CoMpAny Website

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

net Revenue FRoM Asset MAnAgeMent in 2021 (HuF Mln)

9

Special Report

totAl net Revenue in 2021 (HuF Mln) totAl net Revenue in H1, 2022 (HuF Mln)

RAnk

32 | 3

A

A

A

A

Individuals (100) –

Csaba széll Anita MolnárSzéll Zoltán Balla

1123 Budapest, Alkotás utca 53.

(1) 785-4985 info@naiceland.hu

–

100

–

– CPI Property Group (100)

Mátyás gereben Tamás Pók Bea Déri

1138 Budapest, Dunavirág utca 2–6.

(1) 225-6600 hungary@cpipg.com

tibor gasser – –

1093 Budapest, Közraktár utca 30.

(1) 382-7560 office@ gamma-am.hu

Cpi HungARy kFt. www.cpigroup.hu NR

gAMMA pRopeRties kFt. NR www.gamma-am.hu

NR

indotek gRoup www.indotek.hu

A A

A

A

Bartók Udvar office complex, IGPark Polgár, IGpark Karcag, IGPark Kecskemét South, IGPark Kecskemét West, IGPark Tiszaújváros, IGPark Miskolc

A A

A

A

A

✓

✓

✓

✓

–

–

7

–

61

32

–

✓

–

–

✓

–

–

–

–

100

–

–

s iMMo ApM HungARy kFt. www.simmoag.hu NR

A A

A

A

Office buildings: Blue Cube, Buda Center, City Center, Maros BC, Pódium, River Estates, Hotel: Budapest Marriott Hotel, BudaPart Gate

tRigRAnit NR FejlesZtési kFt. www.trigranit.com

A A

A

A

Millennium Gardens

A = would not disclose,

NR = not ranked, NA = not appliacable

46.80 3.80

80.50 19.50

A

A

–

–

100

(100) –

A

100

–

A A

dániel jellinek – –

1148 Budapest, Kerepesi út 52.

(1) 688-1700 indotek@indotek.hu

100

–

– CEE PropertyInvestment Immobilien GmbH (100)

géza barabás – –

1051 Budapest, Bajcsy-Zsilinszky út 12.

(1) 429-5050 office@simmoag.hu

100

–

– TG CEE S.á.r.l.

(100)

tomasz lisiecki Bálint Brenner –

1132 Budapest, Váci út 30.

(1) 456-6200 info@trigranit.com

This list was compiled from responses to questionnaires received by October 19, 2022, and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time.

The list is based on companies’ voluntary data submissions. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14, or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

4

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Socialite

The Dragon Boating Life of the GM of Budapest’s New York Palace Hotel As he quietly goes about his high-powered work, making sure everything at Budapest’s luxurious Anantara New York Palace Budapest Hotel runs smoothly, you’d never know that Tamás Fazekas is also a Dragon Boat Racer. And not only that, but a world champion.

DAVID HOLZER

General Manager of the Hotel since 2019, Fazekas is Budapest born and bred.

Starting his career at Hilton Hotels, he spent several years abroad, mainly in Germany, Switzerland and Dubai. Fazekas is married with three sons, none of whom have followed him into canoeing, he says.

And yet, this September, he was part of the Hungary team that won the 10-man 2,000 m at the 2022 ICF Dragon Boat World Championships in Racice, Czech Republic, in September in the Master 50+ open (men) category. He was also part of the 500 m crew of 20 in the Senior (meaning professional) open category, and the 500 m crew of 10 in the Master (40+) open category.

Out of nowhere, it seems, Dragon Boat Racing has become the world’s fastestgrowing water sport. The U.K.’s Prince William and Kate Middleton even took part in a race across Dalvay Lake in Canada in 2011, on their first royal tour as a married couple. The prince won, even though Middleton raced as a member of the Sisterhood Dragon Boat team for several years alongside an impressive array of high-achieving professional women.

As you might expect from the name, Dragon Boat Racing has its origins in China. It began more than

2,000 years

ago in the rivers that fed the fields as a fertility ritual in advance of the coming crop planting and harvesting seasons.

Tamás Fazekas (center step, front row, second left) and the victoriuos Hungarian team at the 2022 ICF Dragon Boat World Championships.

Appropriately enough, at a time when many of us are glued to “House of the Dragon,” the HBO “Game of Thrones” prequel, an alternative origin story is based on the legend of warrior poet Qu Yuan. When Qu Yuan threw himself into the Miluo river to protest against corruption, the people nearby hurried out to save him from the dragons that infested these waters by beating their drums and splashing their oars.

Paddle Off!

20 people, a far cry from the solitary pursuit of canoeing he took up aged 11 when he trained on the Danube.

Unity in Rhythm

“The most important thing is unity. We must all paddle at the same time, and the rhythm must be the same; otherwise, it all falls apart,” he says. “It’s a kind of orchestra where everything needs to happen in harmony, with the drummer setting the rhythm and the steersman keeping the boat headed in the right direction.”

Fazekas’ team is drawn from all over Hungary. His teammates have a background in canoeing and are amateur sportspeople who all train regularly.

The GM has chiefly competed in Europe with the team, although he also found a Dragon Boat outfit when working in Dubai and participated in competitions with them. “A great experience,” he says.

Sadly, the 2020 championship, meant to be held in India, was canceled. In 2024, it will take place in Hong Kong, closer to the ancient roots of Dragon Boating, and Fazekas is determined to be there.

“Dragon Boating is teamwork.

You have as many as 20 team members in one not-so-large boat, all having to move together. In the hotel, we must always act as a team, work closely together, and coordinate how we do our jobs. Dragon Boating also teaches persistence and a philosophical approach to life.”

Dragon Boating took off in what we might loosely call the West when it appeared in New Zealand around 1980. From there, the sport went global. Today, around 90 countries have Dragon Boat teams.

It has also become popular in corporate training environments. Companies all over the world use the sport as a way Fazekas takes to the water as often to, as the U.K.’s Dragon Boats Events as he can, whether to train with the team company puts it, provide “the ultimate or canoe solo on the Danube. team building to boost morale while “Sometimes in the evening,” he says, promoting key abilities essential in a “away from the city, I listen to what I call work environment. Dragon Boat Racing ‘the voice of the water.’ This takes me is an exhilarating and addictive sport away to a totally different dimension.” that requires communication and Back in his day job, Fazekas acknowledges teamwork to be successful.” that the experience of Dragon Boating Fazekas has been Dragon Boating and lessons learned from the sport certainly since 2010, when he took part in shape his work in the lavish, glittering the World Dragon Boat Racing environment of the Anantara New York Championship on the River Tisza in Palace Budapest Hotel’s corridors of luxury.

Szeged, in the south of Hungary.

“Dragon Boating is teamwork. You have “The coach of the Römi team from as many as 20 team members in one Csepel was selecting canoeists to join not-so-large boat, all having to move the team for the competition,” he explains. together. In the hotel, we must always “I’d canoed before. I joined and fell in love act as a team, work closely together, and with Dragon Boating. It’s a challenging, coordinate how we do our jobs. Dragon competitive sport involving teams.

Boating also teaches persistence and a Tamás Fazekas, general This was perfect for me.” philosophical approach to life,” he says. manager of the Anantara New He also participated in “We take to the river or lake rain or York Palace Budapest Hotel. the shine, whatever the weather. Despite disappointments, we never give up.

These are good lessons for corporate World Dragon Boat Racing This is the reason for the drums life and a sometimes challenging job Championship, again in Szeged. used on all Dragon Boats and, less such as mine,” he continues.

Considering Hungary was competing commonly, the ornate Chineseagainst nations such as Australia, style boats themselves. Traditionally, China, Russia, and the United States, Dragon Boats are long and narrow, To find out more about Dragon Boating in the country did pretty well. have a flat bottom and raised prow and Hungary, head for the Hungarian Canoe Fazekas became part of a team that stern. They’re around 20 meters long Federation website: www.kajakkenusport.hu usually numbers between 10 and and weigh about one to two tonnes.

2013

34 | 4

Socialite

PRESENTED CONTENT

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Year-long Commemoration Honors Author Géza Gárdonyi’s Memory in Eger Honoring the memory of Hungarian author Géza Gárdonyi, his hometown city of Eger has been engaging in a year-long memorial year in 2022, marking the 100th anniversary of his death.

CHRISTIAN KESZTHELYI

The town itself played a historically significant role in the survival of Hungary when it was besieged in the 16th-century Ottoman expansion into Europe. “If Eger falls,” as Gárdonyi writes in his historical novel the “Eclipse of the Crescent Moon” (Egri Csillagok), “the Turks will shake down the smaller castles like nuts. And then history will be able to inscribe Hungary in the book of the dead.”

Eger’s pride in its world-renowned writer is hard to doubt. As Deputy Mayor Gábor Minczér tells the Budapest Business Journal, without Gárdonyi’s lifework, with a solid focus on Eger, where the author lived for an extended

period and which he loved, the city today would not enjoy such popularity on a national and international scale.

As Gárdonyi writes in “Eclipse of the Crescent Moon,” the “rage of tempest, a world-shattering storm of fire and blood” took Eger under siege. Without his storytelling abilities, the critical function of Eger in standing as the first line of defense for Hungary may have sunk into oblivion.

“Géza Gárdonyi brought Eger into the cultural and literary spectrum with his exceptional writing and storytelling skills,” Minczér tells the BBJ in an exclusive interview. “We are proud of this magnificent author and are thankful for what he did for our city. With this in mind, we celebrated his grandeur in 2013, which was the anniversary

and performances. The events are organized in collaboration with local institutions and the university and have included scientific conferences.

Based on feedback and footfall, Minczér has deemed the memorial year a success from both cultural and touristic aspects.

The memorial year peaked in August with the Gárdonyi Days, a week-long series that attracted substantial interest in the city.

Events were scattered across Eger, including a jazz festival, joint musical and literary evenings, concerts, guided tours to pivotal scenes from “Eclipse of the Crescent Moon,” and educational treasure hunt activities for children.

The author’s importance is not limited to Eger but stretches to the borders of Hungary. Nationally, “Egri Csillagok” is an essential right-of-passage work for students, a critical foundation story to read and know by heart. It has been translated into two dozen languages, Gábor Minczér helping to tell the historical events of the battle for Eger to an international audience.

“Gárdony lived in many places in his of his birth, and we are doing so again lifetime, but he made it clear in his this year, the anniversary of his death.” works that he particularly loved living Cultural and Tourism Success in Eger. He is an important figure The commemoration spans the entire in our literary history and cultural year, centered around the slogan heritage, and we hope our year of “Writing for the Moon,” and showcases commemoration adequately honors a wide range of thematic programs his memory,” Minczér adds.

ADVERTISEMENT

Dreams Come True Brick by Brick: Popular Lego Exhibition, ‘The Art of the Brick’ Opens in Budapest “Shocking,” “amazing,” and “breathtaking” are just some of the words visitors have used to try and describe their experience at the opening of The Art of the Brick exhibition in Budapest, where Nathan Sawaya, the incredible artist from New York showcases his Lego sculptures.

“I adore everything that is Lego. This exhibition is a great family program, just like building Lego together; every generation enjoyed it in my family. You can’t comprehend how pieces this tiny can make such unique artistic creations.

When we go home, I’m sure the Lego will come out to play,” says Claudia Liptai, the host at the opening.

“The Art of the Brick” is one of CNN’s Top 10 “must-see” traveling exhibitions.

As Chresten Bruun, senior president of the Lego Group and leader of the Lego

factory in Nyíregyháza, stated, they are honored to see this exhibition in Hungary, that there are no borders of creativity, and that Lego is still so much in style.

“One of the five Lego factories is operating in Nyíregyháza, Hungary.

We are very proud to be the manufacturers of these magical little bricks. It is even possible that these very pieces that are on show were made at our factory,” Bruun says.

Nathan Sawaya’s art is well known and respected worldwide: “The Art

of the Brick” exhibition has already been a massive success in 42 countries.

Its mission, other than to bring pure joy and the “Wow!” factor, is to bring art closer to the younger generations against online trends and to show that nothing is impossible. Even the tiniest pieces can make the biggest miracle, says Tamás Elter, art historian, and curator of the exhibition.

“I use the Lego bricks as the medium between the people and art because it’s interesting to see people’s reactions

to something they are already familiar with. Everybody connects with Lego because it’s something that a lot of children have at home, and even adults have a connection with it,” says Sawaya in his welcome to the exhibition from New York.

“I raise the bar with this simple toy and elevate it where it’s never been before.

I like the cleanness of the whole, the angles, and the separate lines.

As with lots of things in life, this is all about perspective. Up close, the brick’s shape is characteristic. But from afar, everything comes together in arches. And everybody knows that dreams are made of bricks,” he adds.

“The Art of the Brick” is open until January 31, 2023, in Komplex, Király utca 26, Budapest. As part of the show, FunZones have been created where children and adults can play together with Lego in a big pool. The exhibition is accessible for all, and audioguides are available as well.

4

www.bbj.hu

Budapest Business Journal | October 21 – November 6, 2022

Sopron Surprises as it Emerges From Burgenland’s Shadow As a wine region and a city, Sopron literally sticks out from the Hungarian pack. Hungary’s most loyal city (it voted in a referendum to remain part of the country in 1921) and its environs jut out into Austria’s Burgenland (itself once part of Hungary); the influence from the German-speaking world is pronounced.

6.5 hectares

of vines. It also produces Pét-Nat (from “pétillant naturel,” a French term that roughly translates to “naturally sparkling”), including a juicy rosé from Kékfrankos.

Another white grape that’s quite common in Sopron is Zenit (a crossing of Bouvier and Ezerjó created by Ferenc Király in 1951). Bónis-Reitter Borászat wowed with its Zenit offering, Vad Virág (Wildflower) 2019.

It was vinified in Austrian Stockinger barrels, is full-bodied, and very long.

Although it has a hint of vanilla on the finish, the 15 months it spent in oak doesn’t override the other characteristics

He is a versatile winemaker, producing precise, pristine wines and exercising a flair for experimentation, such as Pét-Nat, Orange wine, and oak-aged rosé.

A 2014 Kékfrankos rosé he showed had been aged for two years in oak, but it was still really alive, without a hint of oxidation, with zesty freshness to complement the tobacco and waxy notes from the oak and the long bottle aging. He also makes a nice dry Zenit, as well as a botrytized sweet version.

Molnár also serves as president of the Sopron wine route.

Sister Act

ROBERT SMYTH

Sopron has long been in the shadow of its Austrian neighbor, but finally, and I never thought I’d say it, some of the Kékfrankos (Blaufränkish) wines it is now making are of Burgenland-like quality.

At the Kékfrankoshangja event, held at the Ferenc Liszt Conference and Cultural Center in Sopron on October 4, it was striking how many new labels (several Hungarian with Germanic names) are coming through with wines made from Kékfrankos and other grape varieties.

The main white grape of the Sopron region is Zöldveltelini, the same grape as Grüner Veltliner in Austria, from where it originates. Wines made from this grape are often said to have aromas of white pepper, but so often, I find this isn’t the case.

However, this note is loud and clear in Stubenvoll Pince’s Zöldveltelini 2021.

The cellar was founded as recently as 2020 and has

Socialite | 35

Bónis-Reitter’s rosé. Photo by Or Szűcs. of the wine, with its abundant floral and tropical fruit notes. It costs HUF 3,200 from www.bonis-reitter.com.

The grapes for this wine came from the legendary Steiner vineyard, located next to Lake Neusiedl (Fertő). Another excellent wine from the Bónis-Reitter winery was its Pinot Noir rosé 2021, which spent eight hours on the skins before pressing and is really crispy, elegant and Provençal in style. It took home a gold medal from the Berliner Wine Trophy.

Spontaneous Ágnes

Zachar was another new name for me. It is a tiny winery and apartment operation where the wines are made by Ágnes Zachar, who has two hectares of Zöldveltelini, Chardonnay, and Kékfrankos vines on the banks of Lake Neusiedl. She goes for spontaneous fermentation in all her wines, which are concentrated and complex. They are available from borfalu. hu, which also has a store on Szondi utca in Budapest’s District VI. The organic Horváth Borászat operation showed some really intense yet balanced reds from Kékfrankos, Cabernet Franc and Syrah varieties, which appear to be helped to ripen by warming temperatures though without the alcohol level shooting up.

At Steigler Pince, another organic winery, a meeting of minds between the owner and winemaker has reached an excellent standard in just three years.

Tamás Varga worked as an assistant winemaker at the brilliant biodynamic Hans und Anita Nittnaus winery in Gols, Burgenland, when he met the likeminded Bálint Lőrincz at a wine club.

Heading down the steps into the winery’s several-hundred-year-old cellar on Balfi utca in Sopron’s old town to taste layered and textured wines from grapes such as Furmint, Zöldveltelini, Kékfrankos, Cabernet Franc, and Syrah is a great experience.

Steigler’s superbly spicy Syrah 2021 (HUF 5,900 from steigler.wineshop.hu) claimed

st 51 place

in this year’s Winelovers 100 legjobb Magyar Bor (100 Best Hungarian Wines).

The quality from more established vintners was equally impressive. “Some people call me an industrial spy,” quipped Tibor Molnár, winemaker and owner at Vinceller, who brought back know-how from his time in Austria, where he worked with Fred Loimer in Kamptal and Anton Iby in Mittelburgenland.

The Austrian-born Pfneiszl sisters, Birgit and Katrin (who attended school in Hungary), presented a fine pair of Kékfrankos wines that cleverly captured the versatility of the grape variety. The first, Kékfrankos ‘Together Again’ 2021, was briefly aged, mainly in the tanks, and was bottled early, before last Christmas.

It is light-bodied, fresh, floral and fruity, oozing the grape variety’s trademark sour cherry notes, with light tannins and soft acidity, and costs HUF 3,000 from pfneiszl.hu.

The second, Kékfrankos ‘Black Pearl’ 2019, was fuller-bodied, aged for 22 months in mainly used Hungarian oak barrels, with hints of dark chocolate nicely complementing the soft, juicy sour cherry and other red fruit. This version costs HUF 4,800. Both wines slipped down a treat.

Luka Pincészet’s Kékfrankos was also classy, although a visit to the bijou winery in Fertőrákos the next day revealed Enikő Luka’s love of another grape variety that Blaufränkish parented, together with St. Laurent: Zweigelt. It was crossed by Dr. Fritz Zweigelt

in

1922

at the Teaching and Research Center for Viticulture and Horticulture in Klosterneuburg, close to Vienna. It is now Austria’s most planted black grape, and Luka has long led the way with the variety in Hungary.

Enikő Luka’s father, József, believed greatly in the potential of Zweigelt to produce fine wines in the mica-schist and limestone terroir of the Sopron wine region. As a child, she fell in love with the vibrant purple color of the fermenting must of the Zweigelt. Today, purple leads the color scheme of the tasting room.

Rebeka Takács joined as the winemaker in 2020 and attends the 3.5 hectares of vines, replacing Gergely Magas, with whom Luka worked for years. Luka now emphasizes the female touch on both the physical and sensory sides.

“The barrels have to be small enough so that we women can carry them. My husband drives the tractor,” says Luka.

Austrian Rudi Krizan, the one-time winemaker of Etyeki Kúria, also helps as a consultant. Incidentally, Etyeki Kúria, based in the Etyek region just 28 km west of Budapest, has been stepping up its presence in Sopron and is expected to open a winery in the area soon.

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