Investing in Hungary 2023-2024 Sample

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IN HUNGARY

P r i c e : H U F 3 .9 9 0 Ι E U R 10

AU TOMOT I V E › E-MOBILI T Y › HE ALT HC ARE › FDI FIGURE S › IN VE S T MEN T PROMOT ION › RE AL E S TAT E

HUNGARY:

A MEETING PLACE FOR EAST AND WEST

Investing in Hungary

CONTENTS Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Investment 2023 Chapter Closes, and 2024 Opens, but What Changes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Myhive Office Brand Brings Flexible new Dimension to Coworking Spaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Bilfinger Tebodin Supports Producers With Climate-friendly Mobility Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

INVESTMENT IN HUNGARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

New FDI Volume Highs Driven by Green Transition and Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Embracing the Digital Revolution to Harness Hungary’s Health Data Unicorn . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Thoughtful Design Creates Seamless Operation

The Cooperation between Frame Group and UniCredit Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Longer-term Investment Possibilities Seen in Real Estate Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Case Study: A Little Piece of Savile Row in Budapest’s District V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Case Study: PwC Hungary Invests in new Debrecen Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Case Study: Jysk Invests in Gigantic Automated Warehouse in Ecser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

INVESTING IN HUNGARY 2023-2024 | A BUDAPEST BUSINESS JOURNAL PUBLICATION BBJ Editor-in-chief: Robin Marshall • Editorial: Kester Eddy, Bence Gaál, Robin Marshall, Gary J. Morrell • Sales: Csilla Lengyel, Bernadette Oláh, Erika Törsök • Layout: Zsolt Pataki • Cover image: Based on an image by Petr Vaclavek / Shutterstock.com • Publisher: Business Publishing Services Kft. • Media representation: AMS Services Kft. • Address: Madách Trade Center, 1075 Budapest, Madách Imre út 13-14. • Telephone: +36 (1) 398-0344 • Fax: +36 (1) 398-0345 • ISSN 2560-1490

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INVESTMENT IN HUNGARY ▶▶▶

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Investing in Hungary

In May 2023, Novartis announced an R&D hub would be established in Hungary. On the lefthand side of the are Minister of Foreign Affairs and Trade Péter Szijjártó and István Joó, CEO of the Hungarian Investment Promotion Agency, at the signing ceremony.

our development activities across the region. This also means new jobs and an increase in R&D spending, access, innovation, all the things that we talked about earlier. This is great news for Hungary. Many countries competed for this designation. Our excellent performance in previous clinical trials, the Hungarian government’s commitment to making Hungary a leading source for innovation in the future, as well as our confidence that in the medium- and long-term Hungary will be an important player in the region and beyond, all these things contributed to Novartis saying, “Look, we are we are committed to Hungary in the long term, we want to play an active role.” And we’re excited about playing that leading role here across the ecosystem and really across the lifecycle. So, a big moment for Novartis in Hungary and hopefully a big moment for Hungary as well.

BBJ: What would it mean in practice?

Does the company have a decisionmaking role in terms of what will be done where? Or is it coordinating logistics to get things to the places where they are needed?

MZ: It’s a bit of both. Anytime you are doing research in later-stage trials, you’re going to have big populations that you have to go out and find. Not just site recruiting but also patient recruitment to fill these trials.

So, there’s going to be some allocation of what countries and sites will be completing that, but also the actual execution. It’s the design of the trial, the preparation and sourcing, and then the actual execution, follow-up, and analysis. And with our role across many different parts of the world and the region, that just means more attention, more capabilities, and more high-value positions will be here in Hungary. Plus, on top of that, more

research will hopefully get executed in Hungary as well. So, it’s a win-win for Hungary and a win for patients.

BBJ: And how many countries? Is it across Central and Eastern Europe?

MZ: It’s interesting in that it’s actually across Europe, Africa, and the Middle East. We’re still sorting out the exact number of countries, but it’ll likely be 12 to 15.

BBJ: You are also getting involved with digital innovation and patient pathways. Is this about getting the right medicines to the right patients, which is important in itself, or is there more to it than this?

MZ: Fundamentally, the only metric that matters for Novartis is whether our breakthrough innovations make it to the patients who need them.

But along the way to achieving that, especially if you think about digital and

Investing in Hungary

AI and some of the newer innovations, you have the ability to solve so many different challenges that exist in the healthcare business, whether that’s in Hungary or elsewhere. And so, where there are barriers that exist, where there are inefficiencies that exist, that is where Novartis wants to be a leader in the digital revolution. We embrace advanced digital technologies, new analytics, and new ways of doing things. Two years ago, we hosted a digital health startup competition with a focus on a couple of challenges, heard from a lot of different startups and had a lot of great ideas that generated good practice. We’re also a frequent collaborator and attendee at the Digital Health Summit. This year, we’re going to be joining the jury

“The announcement that Semmelweis is approved for first in-human drug development for Novartis is the culmination of a lot of great research being done in Hungary over the last few years but also a signal that Hungary is continuing to advance its capabilities. Novartis has stringent criteria.

We only have a very limited number of sites and countries that can get this certification; for Semmelweis to be designated as one of these main sites is a huge deal.”

Novartis is committed to improving health outcomes across Hungary.

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Investing in Hungary

LONGER-TERM INVESTMENT POSSIBILITIES SEEN IN REAL ESTATE INVESTMENT Investor sentiment reflects the current cautious wait-and-see strategy towards the Hungarian property markets and, indeed, the wider CEE region and Europe as a whole. This is set against an unstable geopolitical environment, the resulting economic and financial uncertainty and the expectation gap between buyers and vendors.

HelloParks Páty

By Gary J. Morrell However, Hungary has a strong stock and pipeline of investmentstandard sustainable assets in the office, industrial, hotel, retail and mixed-use sectors that meet the requirements of both international and Hungarian capital. Furthermore, the country provides a significant yield premium on both Western European markets and even Poland and the Czech Republic, the leading markets for the region.

“It is difficult to be precise, but at the moment, indications suggest a turnaround in the investment markets towards the end of 2024 and into 2025.

It is already happening to some extent, but at a slower pace to other markets in Europe,” says Kevin Turpin, director of CEE capital markets at Colliers.

In the first three quarters of 2023 (the most up-to-date figures at the time of writing), domestic money has been responsible for about 60% of all investment volumes

in the CEE-6 (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) with Czech capital transacting 33% of the volume and Hungarian capital 9%, according to Colliers.

“International investors are assessing the challenges and opportunities both in their own and international markets.

As a result, there is currently less competition for domestic capital in CEE. International investors will be back and active on the sell and buy sides once the pricing gap has closed,” Turpin says.

Investing in Hungary

“The next 12-18 months will be a great time to acquire real estate, yet challenges remain with international and institutional capital applying caution in general, not just towards CEE,” he adds.

Analysts agree that this does not mean there is not good business to be done out there, especially for those with a little risk appetite.

APPEALING DEALS “On a selective basis, there are currently very appealing deals to be done in Budapest on the office segment, which is out of favor with most large institutional investors. Atenor and CA Immo are currently on the market with several office properties,” Benjamin Perez-Ellischewitz, principal at Avison Young Hungary, notes.

Atenor has sold the recently completed the 15,500 sqm Breeam “Excellent” rated Roseville office complex in Budapest’s District III. This is a continuation of what has become a traditional pattern for the regional developer of speculative development with a strong pre-lease, letting a significant proportion of a project and, finally, securing a sale to an investor.

“We have sold RoseVille to an international investment group with a Hungarian fund. The sale was quick and aligned with the current market conditions,” confirms Máté Galambos, director of leasing at Atenor Hungary.

“This was the first real estate acquisition by the [purchasing] group in Hungary, and we see it as positive that we have attracted new equity. However, in the current investment environment, only opportunistic investors are looking at Hungary,” he says.

ESG credentials and third-party sustainability accreditation are playing an increasingly central role in higher end investment transactions in Hungary and across the Central European region.

“Sustainability aspects played an important role during this investment; therefore, I am expecting more of these

“It is difficult to be precise, but at the moment, indications suggest a turnaround in the investment markets towards the end of 2024 and into 2025. It is already happening to some extent, but at a slower pace to other markets in Europe.”

deals where sustainability is considered as one of the main elements and aspects from an investment point of view,” says Zsombor Barta, ambassador of the Hungarian Green Building Council (HuGBC), of the RoseVille deal.

In another office investment deal, the Hungarian Erste Real Estate Fund has purchased the first phase of the 27,000 sqm H2Offices in the everpopular Váci Corridor from Skanska.

The complex is Leed “Platinum” accredited; Skanska is also aiming for Well certification for the complex.

LONG-TERM TRUST “We are delighted that our long-term trusted relationship with Erste Real Estate Fund resulted in the successful transaction of the H2Offices project. This transaction stands as a testimony to the interest in high-quality and sustainable real estate products, indicating a positive shift in demand on the investment market,” says Katarzyna Zawodna-Bijoch, president and CEO of the Skanska commercial development business unit in CEE. Commenting on the deal, PerezEllischewitz describes it as “the deal of the year […]. Even if the office asset class remains less prominent than before, transactions are possible for assets that tick the boxes.”

Office developers are exercising caution with new projects, which are not being initiated given the uncertain development and demand environment. However,

despite concerns over longer-term letting and demand, office working practices and the time spent in the office, as well as rising development, construction, maintenance and energy costs and more expensive debt finance, office developers are going ahead with ongoing single building and phased projects.

The financial environment and higher interest rates favor those using their own development finances and selling off assets to investors. From a positive perspective, ever more sustainable office developments are being delivered in response to market pressures and environmental regulations.

IO Partners has traced 4.34 million sqm of office stock in Budapest with a current vacancy rate of around 13%.

A further 287,000 sqm of space is under construction and expected to be completed in the 2023-2026 period.

An alternative development option is the renovation of existing quality buildings, notably in the Central Business District, where there is a scarcity of plots and a number of listed buildings needing restoration. In one such example, Europa Capital purchased the 12,500 sqm Akadémia office building in the historical heart of Budapest in January 2022, in partnership with ConvergenCE as asset manager, and has undertaken extensive works in line with Breeam, Well and WiredScore accreditation.

It has since been rebranded Academia and reopened in the late fall of 2023.

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