HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU
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BUSINESS JOURNAL BUDAPEST
VOL. 28. NUMBER 19
OCTOBER 16 – OCTOBER 29, 2020
SPECIAL REPORT
Real Estate Development
SPECIAL REPORT
Developing a Pandemicproof Future for Hungary BBJ real estate editor Gary Morrell speaks with some of the leading players in the country about the prospects and challenges facing the various market sectors in Hungary this fall and into next year. 10 NEWS
Industry Shows Vital Signs but Overall Outlook Worsens Although August industrial output data is promising, the outlook for the Hungarian economy has deteriorated, according to analysts. It seems that the second wave of the pandemic will surely take its toll on Hungary. 3
SOCIALITE
A Devilishly Good Story
David Holzer gets the low down on the country’s leading energy drink, its international success and the secret behind the creation of its eye catching name. 30
KPMG Reveals CEOs’ Take on COVID
INE BUS
SS
Rezső Rózsai national senior partner and CEO of KPMG in Hungary reveals the findings from the Big Four consultancy’s updated CEO Outlook 2020, with COVID very much front and center. 6
News
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THE EDITOR SAYS
EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Zsófia Czifra,
Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Robert Smyth, Zsófia Végh. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:
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A FLEXIBLE MEDIUM FOR TECHNO TALK It has been a busy time for us: We are running two deadlines this week (this issue of the Budapest Business Journal, plus our “Invented in Hungary” special publication), in addition to working on the annual – and always much anticipated – Book of Lists in the background. What particularly caught my eye amid the deluge of text editing was a seemingly throwaway line from AI Coalition head Roland Jakab (whose daytime job is as managing director at Ericsson Hungary) in an interview for that “Invented in Hungary” publication. In listing fields that will be given special attention under the AI Strategy, Jakab says, “Developing trustworthy AI and making the Hungarian language ready for the age of AI are also part of the project.” It’s the second part of that sentence that grabbed my attention. Lovers of Hungarian literature – my wife, for example – are always telling me how expressive the Hungarian language is, how you can say things in Hungarian you can in no other language. I don’t doubt that for one moment, although I am pretty sure there are things you can say in most languages which you cannot translate into another. Put another way, it must be apparent that there are also things you cannot say in Hungarian which you can say in other languages, and that is particularly true when it comes to technobabble. One of my earliest memories of how impenetrable Hungarian can be when you don’t speak the language was hearing two Hungarian IT guys talking to each other, the continuous flow of the magnificent Magyar nyelv broken only by references to “Vindows” and “Vinchester.” That was 20 years ago (I doubt many people today even know that a Winchester, in this context, is an external hard drive, and not a repeating rifle), but there is still plenty of tech-buzz that does not get translated in the 2020s.
I was discussing podcasts in English the other day with our bilingual eldest child when my wife asked her what “podcast” was in Hungarian. Our daughter started to answer but then stopped, looked at both of us and said, “I have no idea what that would be in Hungarian. We don’t have a word for that.” She seemed genuinely bemused and a little disappointed by that, more so when she remembered that there isn’t a phrase for “social media” either. It seems faintly ridiculous that a language as emotive as Hungarian cannot get to grips with “social media”, which is, after all, composed of two words, both of which have Hungarian alternatives. I guess the problem lies with getting at the concept behind “social media”, but to be honest that is equally missing in the English; but we know what we mean and just plow on anyway. To be clear, I do not think it is worth expending any legislative manhours on artificially forcing the adoption of Hungarian words over foreign (mostly English) borrow words, but I do think Hungarians should be able to discuss “social media”, and perhaps even “podcasts” in their own language. In any case, I am pretty sure the AI Coalition doesn’t have in mind the sort of language reform – although I am told nyelvújítás literally means “language renewal” – that Hungarian went through in the 19th century thanks to the likes of the scholar Ferenc Kazinczy. He, as Britannica.com puts it, “fought to improve the language: he initiated reforms of grammar, spelling, and style that made Hungarian a more flexible medium for literary expression.” What is required today may not be “reform” or “renewal”, but a “flexible medium” certainly sounds like a very good idea. Robin Marshall Editor-in-chief
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News///macroscope
Industry Shows Vital Signs but Overall Outlook Worsens Industrial production in Hungary, 2001-2020 (January-August)
Although August industrial output data is promising, the outlook for the Hungarian economy has deteriorated, according to analysts. It seems that the second wave of the pandemic will surely take its toll on Hungary.
Producer volume index
rose by
6.8%,
based on seasonally and working dayadjusted data. For the period January-August, industrial output fell by an annual 11%. Analysts say the August output data is promising. According to Péter Virovácz of ING Bank, industrial output could return to the levels of the previous years in the fall, provided that the second wave of the pandemic does not have a major impact on the economy. Industrial production showed a significant improvement in August compared to the lowest figures reported earlier; however, the question is whether this tendency will last, says Gábor Regős, head of the macroeconomic division at economic thinktank Századvég Gazdaságkutató. He emphasized it was a good sign that vehicle manufacturing had started to pick up, as it has a significant weight in the industrial production.
6.1%
contraction.
As for 2021, the spring forecast of a 4.2% expansion has been lowered to 3.9%. These figures are worse than those of the Ministry of Finance and the National Bank of Hungary: the first calculates with a 5.1% shrinkage, while the latter sees a 6% drop in 2020. The economy of the entire European Union might fell back by 8-9% this year. In an optimistic scenario, expansion might be 5% in 2021, however, there are several downward risks that might have a negative impact. As for the eurozone, GDP might drop by 9-10% in 2020, and grow by 5-6% in the next year. At for the global economy, the IMF thinks that it will shrink 4.9% this year but could return to its 2019 level in 2021.
ZSÓFIA CZIFRA
Output of Hungary’s industrial sector fell by an annual 2.1% in August, following an 8.1% drop in July, the Central Statistical Office (KSH) said in its second estimate of data released on October 13. The August figures indicated a move closer to a recovery after falling by around 8% in the previous two months. The scale of those declines was an improvement from doubledigit drops in April and May because of a pandemic lockdown. Working day-adjusted data shows industrial output edged down by 0.2% in August. The KSH said the output of most branches of manufacturing fell in August but the biggest, such as vehicle manufacturing and, “to a lesser degree”, computer, electronics and optical equipment, increased. In a month-on-month comparison, industrial output
outlooks for Hungary from previous projections, making it increasingly obvious that the quick, V-shaped recovery once hoped for is a thing of the past and a W-shaped bounce-back is much more likely to occur. Takarékbank now calculates with a 4.7% setback to growth in 2020, down from its earlier projected 3.2% drop. As for the next year and for 2022, the bank forecasts 7.2% and 4.7% expansion, respectively. In its latest report it says Hungary’s GDP growth might reach 18% in the second quarter of 2021, due to low base effects. The International Monetary Fund has also released a more pessimistic economic forecast for Hungary, nearly doubling the losses the Hungarian economy could suffer in 2020. While in its spring forecast, the IMF said Hungary’s GDP could drop by 3.1% this year, it now expects a
Source:
Car Making Rebounds
Auto manufacturers in Hungary restarted production in May, third shifts were reinstalled in June and July, and there was no traditional summer break in August, thus production had reached pre-crisis level by that month, Gergely Suppan, head analyst at Takarékbank says. A second wave of the pandemic, however, would hinder recovery, Suppan warns, adding that he doesn’t expect lockdowns similar to the spring restrictions. Industrial production could shrink by an annual 7% this year, he thinks, but he expects, due to base effects, some 13-14% rise in industrial production in 2021. Dávid Németh of K&H Bank is quite optimistic: if there are no closures in the industrial sector, production will accelerate from a
11% drop
in the first eight months of the year to single digit growth by the end of the year. There surely will be an increase in production next year, he says; however, it is too early for estimations as there are several uncertainties. In spite of the improving industrial output figures, several analysts and organizations have lowered their growth expectations for Hungary. Minister of Finance Mihály Varga said at a recent conference that Hungary’s economy would not return to growth levels seen in Q1 2019 until the first half of 2022.
Numbers to Watch in the Coming Weeks He said the second wave of the pandemic would result in a W-shaped recovery, instead of the V-shape many economists had initially hoped for. Varga emphasized, however, that Hungary’s economy had entered the crisis with strong fundamentals, and stimulus packages had shaved 3-4 percentage points off the contraction.
Worsening Forecasts
In its latest economic forecast, Hungary’s Takarékbank and the International Monetary Fund have both worsened their ADVERTISEMENT
The Central Statistical Office will release data on the August performance of the construction sector on October 16. In July, construction output volume had decreased by 21% in one year, although it increased by 3.5% compared to the previous month. On October 29, we’ll find out whether the labor market continued to liven up following a difficult few months due to the pandemic.
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Since 2018, he has been working as arbitrator in the Permanent Arbitration Court of the Hungarian Chamber of Commerce and Industry. In 2019, he became a member of the Supervisory Board of the Hungarian Food Bank Association and the vice chairman of the Hungarian Arbitration Association. He also sits on the ICC Central and Eastern European Arbitration Working Group, where he is the only member from Hungary.
Compliance Officer Hired at BKTP Law firm Bittera, Kohlrusz & Tóth (BKTP) has announced the appointment of GDPR expert Krisztina Tóth as compliance officer. Tóth will initially focus on building a watertight compliance and ethics program for clients, with a view to expanding the practice area and offering comprehensive compliance services to other businesses in the future, BKTP says. The compliance officer joins the 10 other lawyers at BKTP as a sole practitioner. Over the course of her career, she has fulfilled compliance and data protection roles at companies such as Erste Bank and Metro. “To create a compliance program for a client of this scale is an irresistible challenge,” says Tóth. “I’m looking forward to working with the team, and to creating a sophisticated program based on integrated risk assurance, building basic complianceawareness across the board and ensuring that all management and staff understands, uses, and applies the basics.”
Forensic and Compliance Expert Joins PwC Hungary
Zsolt Barna Barna will also take part in drawing up and controlling the realization of the Mészáros Group’s strategic goals, aiding its expansion abroad. He formerly worked at OTP Group, in a variety of executive roles. Between 2018 and 2020, he worked as deputy general CEO.
Ferenc Bíró joined PwC Hungary as lead partner of forensic services for Hungary and southeast Europe, with effect from September 1. Bíró has more than 20 years of experience in risk management and corporate governance. He has participated in more than 100 investigations, in close cooperation with law firms.
Csaba Bittera, one of the firm’s three partners, notes: “The time between identifying clients’ need for the role and finding Krisztina was mercifully short, and we’re thrilled to have found such a great fit not only for the position but also for our law firm. The rising demand for transparency in business means that compliance, ethics, and data protection will continue to increase in priority, so this is an intriguing avenue for us to explore.”
Kapolyi Law Firm announced the appointment of József Antal as a new partner, responsible for the firm’s dispute resolution and debt collection team. Antal, who graduated from the Attila József University of Szeged in 1999, has more than 20 years of professional experience in dispute resolution, public procurement, administrative procedure and arbitration law. He began his career at the Budapest office of Baker & McKenzie in 1999, where he also led the dispute resolution team for more than a decade, until 2019. In 2019 and 2020 he worked as head of legal and compliance at Unix Auto and Metro Cash & Carry Hungary.
Deputy Chairman Appointed at Magyar Bankholding
Former OTP Bank executive Zsolt Barna has been appointed deputy chairman of Magyar Bankholding. He will work with chairman-CEO József Vida and board members Ádám Balog and András Bencze. Magyar Bankholding, a joint venture of Takarékbank, MKB Bank and Budapest Bank, is looking to prepare the creation of a new, Hungarian-owned banking group. Barna said that one of his most important tasks will be putting the business on a successful course, closely cooperating with the chairman-CEO.
Anita Kárai The company says that the main aim of the new business development director is to further strengthen the company’s market leadership position in spite of the difficult economic conditions. Her plans also include broadening HumanField’s service portfolio to help clients in even more ways.
Kapolyi Law Firm Announces Partner
Krisztina Tóth
consulting agency. According to HumanField, she has direct contacts with numerous multinational and domestic companies and advises them in several areas.
General Manager at Diageo’s Budapest Business Operations Center
Ferenc Bíró He has worked in many industries, such as pharma, energy, telecoms and manufacturing. He has extensive experience in the detection of complex corporate fraud, corruption and anti-trust cases, and in helping to create a corporate culture that supports achieving business goals by ethical means. Working together with PwC’s growing team of experts, Bíró’s main responsibilities will include reviewing and developing compliance management systems, and fraud detection and prevention. He will support PwC’s clients in litigation, investigations and dispute resolution as an advisor, both in Hungary and the southeast European region.
Mónika Pais has been appointed general manager of Diageo’s Business Operations Center in Budapest, taking over from Gábor Zeisler, who carries on as finance director, Diageo Northern Europe. Pais started her financial career at PwC, where she spent 11 years in several roles. She has been working at Diageo for more than 12 years, during which time she has held several senior management positions, including assistant treasurer and financial reporting director, her most recent role being group chief accountant.
Business Development Director Named at HumanField
József Antal He has represented domestic as well as international companies in civil, administrative, criminal, public procurement, competition and arbitration matters; he regularly assists clients in contractual law, damages and other civil law matters as a legal advisor.
Executive and specialist search company HumanField has announced the appointment of Anita Kárai as its new business development director. Kárai graduated as an economist and has more than 15 years of experience in business development. Prior to her HR career, she first gained experience in the public sector and then at multinational corporations. Later she worked as a customer relationship director at a Hungarian
Mónika Pais She continues to be responsible for Diageo’s external reporting and, as general manager of Diageo Budapest, her responsibility will be to lead the operation in the Hungarian capital.
News | 5
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Budapest Business Journal | October 16 – October 29, 2020
Coronavirus ///roundup COVID Continues to Impact GDP, but Progress on Medical Front On a quarterly basis, gross domestic product is expected to grow at a record high, but the performance of the Hungarian economy may still lag behind 2019 by 4.8–6.2%, due to the onset of the second wave of the coronavirus, says economic daily Világgazdaság.
2ND DISTRICT
Based on the data known so far, GDP may have shrunk by 6% in the third quarter of this year compared to the same period of the previous year, said Dávid Németh, senior analyst at K&H Bank. Minister of Finance Mihály Varga presented his ministry’s weekly economic index at the 58th traveling meeting of the Hungarian Economic Association at the end of September, which showed a lower annual decline of 4.8%. The September Purchasing Managers’ Index was slightly above 50 points in July and August, but fell to
48.8 points
in September as a result of the second wave of epidemic. Economic research institute GKI forecasts Hungary’s GDP will decline 7% this year and predicts the country’s economy will only fully recover from the coronavirus crisis in 2022, according to state news agency MTI. Economic research company KopintTárki forecasts a 5.8% drop in GDP this year, according to CEO Éva Palócz. The International Monetary Fund (IMF) has increased its projection for the amount Hungary’s economy will contract to 6.1% this year in its latest World Economic Outlook.
PCR Testing
According to an official decree, the government has allocated a total of HUF 14 billion in the central budget for the National Public Health Center to perform polymerase chain reaction (PCR) tests. With the price of a test set at about HUF 19,500, the funding is enough to perform 728,000 tests. As of October 1, this means just over 8,000 tests a day. Currently, roughly 11,000-13,000 tests are performed daily, but the data shows that this is not enough. According to the World Health Organization (WHO), enough tests should be performed to keep the rate of positive results below 5%. In Hungary, however, this rate has been higher since mid-September,
above
10%,
according to recent data. Semmelweis University (SE) has been involved in testing a new
diagnostic procedure, a one-step PCR test that detects coronavirus faster and easier, the medical university announced in a statement. Barna Vásárhelyi, director of the Institute of Laboratory Medicine at SE, said that classical PCR testing is based on ribonucleic acid (RNA) detection of virus extracted from a sample. That involves a time-consuming, costly process that requires several hours, a reagent, and a dedicated professional. The new PCR tests that don’t require RNA samples are ready for mass production, the deputy head of SE, Attila Szabó told Kossuth Rádió. By cutting out the RNA step, which takes at least six hours, the time to process the test takes about two hours only, Szabó said. The scale of availability of the tests will depend on the producer, he added.
The government has financed production capacity for remdesivir at Gedeon Richter and the pharmaceutical company will deliver the antiviral drug to the state. Richter has enough remdesivir in stock to treat about 250 COVID-19 patients, but it will produce enough for more than 800 patients by the end of October. Meanwhile, mass production of remdesivir and favipiravir, two drugs being used around the world to treat COVID-19 patients, has started in Hungary, according to the Ministry of Innovation and Technology. The government has financed production capacity for remdesivir at Gedeon Richter and the pharmaceutical company will deliver the antiviral drug to the state. Richter has enough remdesivir in stock to treat about 250 COVID-19 patients, but it will produce enough for more than 800 patients by the end of October.
2ND DISTRICT
105 SQM – 4 ROOMS, SZÁSZ KÁROLY STREET
91 SQM – 3 ROOMS, ÜRÖMI STREET
This very sunny, well divided, garden facing apartment has 2 balconies and it is situa ted within a new condominium with elevator. Parking space possibility.
This duplex, top floor, street facing apartment has private gas heating and balcony and it is situated within a well maintained condominium with elevator.
In a completely renovated condominium, this sunny, second floor apartment in good con dition has balcony and it is located near Zsig mond Square.
65.900.000 HUF
71.500.000 HUF
84.900.000 HUF
+36.70.376.4138
2ND DISTRICT NICHOLAS PONGRATZ
2ND DISTRICT
61 SQM – 2 ROOMS, BUDAKESZI STREET
+36.70.365.0827
2ND DISTRICT
+36.70.365.0827
3RD DISTRICT
106 SQM – 4 ROOMS, PASARÉT
134 SQM – UNDER CONSTRUCTION, KAVICS STR.
74 SQM – 3 ROOMS, RAKTÁR STREET
In a very nice villa house, this spacious and sunny duplex apartment has a living room with open kitchen, 3 separate bedrooms, bathroom, large balcony and parking space in the garden.
In a nice villa house, this duplex apartment is under construction, has balcony, terrace and parking space in the garden. Construction plan is available.
In a green area, this completely renovated, very quiet, street facing, duplex apartment has pri vate gas heating and French balcony. It is situa ted within a new built, small condominium.
94.900.000 HUF
129.800.000 HUF
52.600.000 HUF
+36.70.376.4138
3RD DISTRICT
+36.70.365.0827
3RD DISTRICT
+36.20.419.8070
5TH DISTRICT
114 SQM – 4 ROOMS, BESZTERCE STREET
136 SQM – 3 ROOMS, RÓMAIFÜRDŐ
105 SQM – 4 ROOMS, FALK MIKSA STREET
Beautiful panorama over the Buda Hills, this sunny, duplex apartment in good condition benefits of a 18 sqm of terrace and 2 balco nies. It is situated within a new building.
Next to the Danube, within a new built, luxury, wellness residential park with swimming pool and wellkept garden, this spacious apartment has separate rooms and 26 sqm of terrace.
This very spacious, street facing, well divided, top floor apartment has many make over pos sibilities and a great location, Margaret Island is situated only 2 minutes by walk.
94.900.000 HUF
136.900.000 HUF
79.900.000 HUF
+36.20.419.8070
5TH DISTRICT
+36.20.419.8070
5TH DISTRICT
+36.30.886.1014
6TH DISTRICT
140 SQM – 4 ROOMS, BALATON STREET
160 SQM – 4 ROOMS, BELGRÁD QUAY
141 SQM – 3 ROOMS, ANDRÁSSY BOULEVARD
This completely renovated, very bright, well di vided, high floor, luxury apartment has 2 bath rooms and a 15 sqm of balcony with a view over the Danube.
Breathtaking panorama over the Danube, this very spacious, first floor apartment benefits of two balconies and it is situated within a recent ly renovated building.
Beautiful view over the Kodály körönd, this high floor, spacious apartment, that needs renova tion, is situated within a NeoRenaissance style, period building. The building is under renovation.
174.900.000 HUF
229.000.000 HUF
190.000.000 HUF
+36.30.886.1014
7TH DISTRICT
+36.30.886.1014
7TH DISTRICT
+36.70.365.0825
13TH DISTRICT
83 SQM – 2 ROOMS, MAREK JÓZSEF STREET
136 SQM – 7 ROOMS, RÓZSA STREET
130 SQM – 5 ROOMS, VISEGRÁDI STREET
This completely renovated, second floor apart ment has 2 separate bedrooms and big kitchen with dining room. Windows are facing over a quiet street. Next to the City Park.
This renovated apartment has living room with open kitchen, 6 separate bedrooms, 2 bath rooms and balcony. Each room has its own in dividually controlled heating and cooling system.
In the centre of the district, this very bright and spacious apartment benefits of two entrances, so it can be easily converted to two 65 sqm pro perties as well. Excellent investment opportunity.
89.900.000 HUF
90.170.000 HUF
49.000.000 HUF
+36.70.365.0825
13TH DISTRICT
+36.70.365.0825
13TH DISTRICT
+36.70.414.7759
BUDAKESZI
99 SQM – 3 ROOMS, VISEGRÁDI STREET
90 SQM – 3 ROOMS, ÚJPESTI QUAY
372 SQM – 7 ROOMS, BUDAKESZI
This renovated, street facing, very bright, luxury apartment has living room with open kitchen, 2 separate bedrooms and 2 bathrooms. It is situa ted within a nicely renovated period building.
Come and fall in love with this very unique, reno vated apartment just beside the Danube. This property benefits of 2 bedrooms and 2 bath rooms and is situated within a renovated building.
In a quiet and green area, this twostorey, luxu ry detached house has an outdoor swimming pool with outdoor shower, barbeque area and garage. All the furniture is for sale for requests.
108.900.000 HUF
113.990.000 HUF
265.000.000 HUF
+36.70.414.7759
36.70.414.7759
+36.70.376.4138
GRUPPO T.F.M. KFT. 1068 BUDAPEST, KIRÁLY U. 102. EACH AGENCY INDEPENDENTLY OWNED AND OPERATED. • THESE OFFERS ARE VALID, TILL THE APARTMENTS ARE SOLD. • THESE INFORMATION DO NOT CONSTITUTE A CONTRACTUAL ELEMENT.
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Business
COVID Uproots CEOs’ Outlook for the Future Big Four consultancy company KPMG’s CEO Outlook 2020 has revealed a marked change in attitudes among company executives, with challenges posed by the coronavirus pandemic looming over all aspects of business. BENCE GAÁL
The results of the survey, which initially took place at the beginning of the year among 1,300 executives around the globe, quickly became obsolete, therefore KPMG decided to do a follow-up at the end of the summer to get a more accurate gauge of business sentiment. The final outlook was presented by national senior partner, CEO of KPMG in Hungary Rezső Rózsai and IT advisory and management consulting partner Tamás Kórász at the High Note SkyBar in Budapest on October 9. The study revealed that certain existing trends have intensified: sustainability, digitalization and flexible employment have become the guiding principles in the development of business strategy. On the other hand, an unsurprisingly, for most growth expectations have declined significantly. At the beginning of the year, 46% of CEOs trusted that their company would produce at least 2.5% annual growth over the next three years; by the end of the summer, that share had dropped to
because the existing structures and HR strategies are fundamentally changing as a result of events around us,” Rózsai pointed out. “The labor market situation stirred up by the viral crisis has become a primary risk worldwide. With a steadily declining revenue and volume, a company has to consider retaining the workforce and thus putting a cash flow burden on itself, or adjusting the weight of its costs, including salary spending, to a more modest economic outlook.” “This is a more complex issue than a profitability calculation. A careless decision or a poorly chosen strategy could jeopardize sustainable growth in the long run, significantly undermining employee engagement and causing a loss of reputation,” he concluded.
Not Just COVID
Rózsai warned that the appearance of coronavirus was not the only event with worldwide impact that affected the CEOs’ thinking. “Besides COVID, there was another major factor that had a profound effect on business. We must not forget about the social equality movements that have become prevalent in America. Environmental, social, and governance (ESG) aspects are coming into the forefront, with employees expressing an increased demand for relevant measures,” Rózsai added.
just
Rezső Rózsai Some four out of five respondents said that their company’s mission needed to be redefined, with a similar proportion
The supply chains have also been a great source of concern, according to the survey. With the heavy increase of globalization in manufacturing, a number of companies faced problems due to the coronavirus pandemic, and government regulations introduced in the wake of it. Some 67% of executives said that they had to rethink their global supply chain approach due to the disruptive impact of the ongoing crisis. “The tenet of ‘just in time logistics’ appears to be shaken now. Companies no longer believe they should focus on minimizing inventory,” Tamás Kórász said. About 80% of the top managers believed that the pandemic had accelerated digitization processes, and 30% said they were already years ahead in terms of digitization than they had envisioned during the pre-pandemic times.
Some
69%
Tamás Kórász Some 65% of executives at the world’s largest companies believe that when confidence in governments’ crisis management capabilities diminishes, people rightly expect stronger collaboration between business and civil society. “With a more committed and active role, companies stand by the sustainable, environmentally conscious and socially beneficial, contributing to the solution of social issues guided by their defined or redefined mission," emphasized Rózsai. Apart from the coronavirus and ESG goals, climate change was once again among the most important issues on the mind of executives, just as in 2019. In a number of sectors, company leaders acknowledged that climate change poses a serious risk to their business, with 65% indicating that they even feel their personal position is at risk.
Climate Change Gain
35%.
Still, the executives were generally more confident about the corporate outlook than they are about the fate of their country or the world economy. “The epidemic is a threat not only because key employees need to be temporarily absent from work, but also
reporting that their awareness of personal responsibility has strengthened. The proportion of company executives who see their leadership role primarily in maximizing shareholder value has further decreased. By now, less than a quarter of those surveyed agreed with that statement.
CEOs are also looking to doubledown on the structural shifts that have emerged during the COVID19 crisis, like less business travel. Approximately two-thirds of those surveyed replied that they want to lock-in climate change gains made as a result of the pandemic.
of respondents reported that they are likely to reduce office space, and twothirds believe that digitalization has broadened the opportunities in reaching potential workforce. “The entrepreneurial spirit presupposes an even greater need for innovation, agility and customer focus, which the path to digitalization leads to. A flexible working process, alternative sales channels, and the analysis of customer expectations and behavior are priorities that can provide a significant competitive advantage for companies that respond flexibly,” noted Kórász.
“The epidemic is a threat not only because key employees need to be temporarily absent from work, but also because the existing structures and HR strategies are fundamentally changing as a result of events around us.” The research noted that innovations such as accelerated digitalization in the wake of the epidemic and investment in other technologies could be a way out of the crisis. This could also be attributed to the aforementioned fact that individual corporate expectations are more optimistic than forecasts for the country or the world.
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Budapest Business Journal | October 16 – October 29, 2020
Budapest Climate Summit: Pandemic Provides Opportunities Held for the first time, the Budapest Climate Summit was attended by guests and speakers from a total of 21 countries, who came together to discuss how the green transformation of the economy is accelerating in the context of the COVID pandemic.
2050
climate-neutrality
target said COVID, for all it was unwelcome, had created what might be a pivotal moment. “The pandemic has provided an opportunity to find new solutions, to rethink the growth trajectory of our economy. We need to act now because doing it later will cost a lot more. We all need to work together to transform the economy into green,” he said. Although the COP26 climate talks on the UN Framework Convention on Climate Change, scheduled for November this
The Nuclear Option
Can nuclear energy play a role in achieving climate goals? According to Pál Kovács, Secretary of State responsible for maintaining the capacity of the Paks Nuclear Power Plant, these goals cannot be realistically achieved without nuclear energy. “Hungary can only achieve the set climate targets if a new nuclear power plant is built, which could prevent the emission of millions of tons of carbon dioxide,” he said, alluding to the Paks II project to add two more reactors to the country’s sole NPP. In the afternoon of the day-long summit, the leaders of the National Bank of Hungary (MNB), the World Bank, the Asian Infrastructure and Investment Bank, international law firm Dentons and the Blue Planet Climate Protection Foundation discussed the most important issues of sustainable financing.
“We have no other planet, we have to solve the problems here. Climate protection and economic operation are not enemies of each other.”
GERGELY HERPAI
At the conference on October 9, leaders of key companies in Hungary and the region, high-ranking government and European Union and municipal officials, and renowned experts in the field discussed the domestic and international aspects of the green transformation of the economy in the light of the 2050 climate targets. In a crisis, there is always the opportunity. In this, the speakers of the Budapest Climate Summit all agreed, emphasizing that the global economic slowdown caused by the coronavirus pandemic also provides an opportunity for national governments, companies and all of us to move towards a redesigned, sustainable and green path towards our climate goals. Compared to other countries, Hungary is one of those that has reduced its carbon dioxide emissions the most in recent years, while the economy has also been growing steadily, government representative László Palkovics, Minister for Innovation and Technology, said in his opening speech. “We support the European Union’s climate protection efforts, although we still have a long way to go, I am confident that we will achieve the 2030 and 2050 goals,” Palkovics told delegates. The European Commission is a giving green issues a much higher profile and priority. Frans Timmermans, Executive Vice President in charge of the EC’s European Green Deal and its first European Climate Law to enshrine the
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year, have been postponed due to the coronavirus, the United Kingdom, which holds the presidency of the climate summit, wants to take the lead. The net-zero target for 2050 can also be achieved by relying on renewables, the cost of which has fallen significantly in recent times compared to preliminary expectations, emphasized John Murton, the U.K.’s special envoy to COP26.
Cornerstones
One of the cornerstones of the fight against climate change is how large companies, which are the largest consumers in the economy, are transforming their practices and contributing with a credible and consistent strategy to make Europe carbon-neutral by the middle of the century. The challenge of climate change directly affects all sectors. “We are committed to significantly reducing our carbon footprint; in 2017, we were still responsible for 3.5 million tonnes of CO2 emissions, and we have now reduced this proportion
by
35%
in Central and Eastern Europe, where we have also reduced food waste by 66%,” highlighted Matt Simister, TESCO’s CEO for Central Europe. Energy companies have a key role to play in putting the economy on a sustainable path, as they are responsible for a significant proportion of our global carbon footprint. Talking about how this can be done in practice, Attila Kiss, President and CEO of E.ON, said that in future it would like to focus even more on the needs of its customers, with whom they think about the future. “We have no other planet, we have to solve the problems here. Climate protection and economic operation are not enemies of each other,” he said.
Csaba Kiss, deputy CEO and chief technical officer of MVM Magyar Villamos Művek Zrt., emphasized that the MVM Group is committed to helping Hungary achieve its national climate goals. “Our task is to provide the country with safe nuclear energy and, at the same time, green energy from increasing renewable capacity.” Transport is another sector where a major transformation is expected, as it is responsible for almost a third of Europe’s CO2 emissions, the conference was told, meaning its future is closely intertwined with the achievement of climate targets. Andreas Klugescheid, BMW’s director of government and external relations, stressed the importance of the auto maker’s recent announcement that BMW will reduce its CO2 emissions per vehicle by at least a third and total CO2 emissions by 80% by 2030.
Secretary of State for Energy and Climate Péter Kaderják said that the upcoming non-refundable support system for residential solar systems will contribute to the fulfilment of the objectives of the Climate and Nature Conservation Action Plan, the details of which have now been worked out. “It is already certain that people living in disadvantaged regions and smaller settlements will be able to apply. They will not be subject to the clearance of accounts,” he said. Terhi Lehtonen, Finland’s Secretary of State for the Environment, also spoke at the conference, outlining the main points of her country's climate protection strategy. The panel on more livable and sustainable urban communities included Ámon Ada, chief climate policy adviser of the Budapest Capital Municipality, Anuela Ristani, Deputy Mayor of Tirana, Veronika Erős, head of the Green Bus Project Office, and Péter Csépányi, deputy director general of Pilisi Park Forest.
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Budapest Business Journal | October 16 – October 29, 2020
Malinvestment in our Strange new Economic Environment
Just as the north star served ancient navigators as a compass, so too interest rates serve modern decision makers as a compass for making investment decisions. Prices are essential signals in a market economy. The interest rate is perhaps the single most important price or signal in every market economy. If government distorts prices through monetary inflation or artificially low interest rates, a distortion in resource allocation is likely to occur: malinvestment.
Photo by muratologia/Shutterstock
Interest rates are near zero in most of the developed world, sometimes negative. Despite this, new investment and velocity of money are falling. To try and stimulate them, governments in many countries are subsidizing loans (for example, Hungary) and in others, guaranteeing bank loans (such as Italy). All this leads to malinvestment, investment that is not efficient (propping up zombie companies or unnecessary projects). Financial columnist Les Nemethy investigates the phenomenon of malinvestment, its perverse effects, and what actors in the economy might do to diminish it.
The Corporate Finance Column
When I ran a telecom company, our board approved only those investments which generated a certain minimum return on investment (which, of course, was determined by our cost of capital at the time). So if interest rates and therefore cost of capital are lower, less productive investments would be undertaken. When this happens on a macro scale, this cannot have any other effect than to reduce standards of living and well-being. A loan is a way of binging forward an expenditure from the future to the present, and the lower the return, the more it will be at the cost of future generations. Investments undertaken at near-zero interest rates rob future generations to create an ephemeral present stimulus. Unless, that us, you assume that there is no intention of paying back loans in the future, just rolling them over, possibly even adding to them, which creates a different set of problems, discussed below. Government stimulation of the economy with negative interest rates becomes counterproductive. Rather than accept negative interest rates (e.g. paying the bank to hold your money rather than vice versa), individuals may well prefer to hoard cash under the proverbial mattress (corporations opting perhaps to keep cash in the safe).
This cannot serve towards any other purpose than further reducing velocity of money, effectively sterilizing savings, depriving the financial sector of its role in transforming savings into investments. While cheap interest is like a drug that stimulates the economy when interest rates are headed downward, when the direction of interest rates, particularly real interest rates begins to increase, many projects and companies that were formerly viable at lower interests lose their ability to service debt and collapse. This explains the addictive nature of low interest rates; it is a hard habit to kick without creating diminished output, unemployment, etc. So what can we do to escape this cycle? First and most importantly: Governments should wean the economy off artificially low interest rates. Over the past few years, the U.S. Federal Reserve had made feeble attempts to do this in the States until COVID hit, which triggered another massive round of lower interest rates and monetary easing.
Sooner or Later
As Ludwig von Mises, eminent economist from the Austrian school wrote in his book “Human Action”, “There is no means of avoiding the final collapse of a boom brought about by credit expansion.
The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as the final and total collapse of the currency itself." In other words, if we continue issuing massive debt and printing money ad infinitum, at some point people may lose confidence in the currency, resulting in its collapse. Bankers should pull the plug on zombie companies and investments, or even better, force their restructuring, even if this results in short-term pain for long-term gain. Furthermore, rather than devoting large amounts to safe investments like government bonds, banks should take on intelligent risk, backing good entrepreneurs with quality projects. Entrepreneurs should use their business acumen to generate high rates of return, both for their own good, and for the good of society. There are still quite a few startups and technology investments that promise considerable returns. Individuals, who ultimately save for retirement, will need to put aside a higher percentage of earnings, not only because interest rates are lower, but when equities trade at record price/earnings multiples, equities, too, are statistically likelier to appreciate less over the medium- to long-term. In short, malinvestment over the years means we have collectively dug a hole that is getting deeper. At some point, postCOVID, we must begin exiting the hole. To use the analogy of forest fires, the more debris and undergrowth exists in the forest, the more substantial the conflagration will be when it comes. We need to begin cleaning out the debris.
Les Nemethy is CEO of EuroPhoenix (www.europhoenix. com), a Central European corporate finance firm, author of Business Exit Planning (www.businessexitplanningbook. com) and a former president of the American Chamber of Commerce in Hungary.
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Special Report
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Real Estate Development
How are Hungarian and regional developers responding to the ongoing coronavirus pandemic and how are the various market sectors holding up?
Market Talk: Developing a Pandemic-proof Real Estate Future for Hungary Industrial Sector Early Winner in Coronavirus Crisis Office Projects Going Ahead Despite COVID Concerns Hotel Development Badly hit by Ongoing Crisis Retail Faces Major Challenges
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Market Talk: Developing a Pandemicproof Real Estate Future for Hungary The COVID19 pandemic has impacted the various sectors and the development, property management and exit phases in the life of a real estate project in different ways and to different degrees. Gary Morrell, real estate editor at the Budapest Business Journal, speaks with some of the leading players in the country about the prospects and challenges for Hungary. GARY J. MORRELL
The conventional wisdom is that industrial is in the most positive position in the short- to medium-term, although developers will need to make significant changes with regard to the provision of amenities, energy usage and the design and management of complexes in order to continue to attract tenants. The office sector will need to adapt to changes in work habits, with changes in interior design, layout and property and facility management of complexes. Hotel and retail face the need to make more fundamental changes to their products in order to maintain demand and keep projects viable in the longer term. All sectors were already having to reconsider and reevaluate their design, PM and FM strategies to meet the changing and more complex requirement of tenants, staff, customers and guests, not to mention ever stricter sustainability requirements and regulations. These have now intensified and developed as a result of the coronavirus pandemic and its aftermath.
All of the above have to be taken on board and market fundamentals need to be positive in order for a project to be successful and to provide an exit strategy for developers once the investment markets pick up. Investors, however, will continue to require quality product and well-formulated and designed assets if they are to be regarded as investment-grade. I think the development possibilities in the office sector will not change significantly in the future in Budapest. Our capital continues to provide attractive opportunities at a good price to value ratio. In the CBD [Central Business District] and Central Buda locations, building renovation projects will be dominant and supply in the
Gábor Borbély Hungary remains attractive as an investment destination with development pipelines with high percentages of preleases. There is available finance, skilled labor force, cheap and favorable business conditions and customers looking to enter Hungary and expand. With regard to an exit strategy for developers, investors are looking at the industrial sector and there are no development delays, with a significant pipeline and strong demand for the sector. Although there is more nervousness regarding the office sector, 70% of the 2020 pipeline is preleased. With regard to investment, there is still a lot of money in the system waiting to be deployed.
developments are still not common as developers prefer to agree with prospective tenants first. After the completion of 104,000 sqm in the first half of the year, another 90,000 sqm of new warehouses are expected to come to the market in the second half year. Large retail developments are still absent with a few exemptions, “plaza stop” [a law introduced to stop the spread of hypermarkets at the expense of smaller stores] still applies and development activity is not expected to jump start in the next 12 months. Budapest hotels are especially exposed to the COVID pandemic; revenues for some may drop by 70%, according to a forecast of the Hungarian Hotel and Restaurant Association, thus, no major developments are expected in the following months. Uncertainty, falling take-up levels and decreasing revenues of tenants are affecting the pace of development the most; in addition, banks tend to apply more strict conditions to secure the financing of new schemes. Once take-up levels come back
Gábor Borbély Business Development & Research Director CBRE Hungary
Nikolett Püschl larger submarkets such as Váci Corridor, Central Pest, Non-central Pest and South Buda will rather be stand-alone buildings and city-in-a-city or campus style concepts. We are ever more diversifying our development portfolio. As of today, we are present in four different submarkets, with two projects in Buda and two additional developments on the Pest side. We are ongoing confidently, step by step. My vision for the longer term is that the countryside, and especially university towns like Debrecen, Szeged and Pécs will become more relevant and, accordingly, new office submarkets will be born. Office tenants are now in a kind of reorganization era, which is of course resulting in changes in their demand. Size optimizing, smart solutions, efficiency and flexibility is the key. The demand for modern high-tech spaces is still there. Transactions are happening and there is activity on the market. As per our experience at Atenor, the development possibilities are still there and if the necessary financial sources are in place, then I do not really see obstacles to developing in the office sector. Nikolett Püschl Leasing & Development Director Atenor Hungary
Amongst the main CRE sectors, office has the most impressive development pipeline by far with nearly 600,000 sqm under construction and 106,000 sqm to be delivered by the end of this year. As banks begin to request solid prelease ratios and investigate tenant credit ratings more, we foresee some
Viktor Nagy to their previously seen increasing course, developments will expand dynamically. There are a great number of planned schemes prepared for launch and many developers already have proper landbanks to suit future demand. Furthermore, a vast amount of investor equity is seeking its way back to the market, so the demand for new product will induce new developments in the coming years. Adorján Salamon CEO Eston International
Adorján Salamon delays in handovers; in return, vacancy may be kept under control. Demand has increased dynamically in the logistics sector; however, speculative
In the office segment, we see that flexible working and home office will be in greater demand. Nevertheless, home office will never completely replace the office workstation. We are convinced that the social aspect and personal interaction are particularly crucial for innovation and productivity in companies. There will, therefore, continue to be demand for high-quality office space with added value. In the medium- to long-term, there may, of course, be changes in the space requirements of individual tenants. It is, therefore, very important to focus on the needs of the customer: flexibility and community play a central role here Continued on page 12 ► ► ►
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BBJ STAFF
How do you go about creating a luxury villa park from a 100-year old renovated building? János Gárdai: White Star Real Estate group takes pride in preserving the treasures of the past centuries and developing real estate that will stand the test of time and deliver enduring value. One example is Markó utca 9: it used to be an electrical transformer building, under protection as a historical monument, which we turned into a Category “A” office building, preserving the historical character and adding special interior design elements. The property on Svábhegy that we are turning into luxury homes once served as a sanitarium for children. When you walk down the magnificent main building, even in its present, run-down state, you can feel the elegance of its past; every cornerstone tells a story. We are confident this will attract potential residents. What can you tell us about the property’s history? JG: It was owned by Baron József Eötvös (1813-1871), a Hungarian writer and statesman. The whole of this Svábhegy neighborhood was popular with the aristocracy in the 19th century. We aim to bring some of this feeling back
Tell us more about those amenities. JG: From the spacious and elegant communal areas and reception services to a cigar salon, equipped fitness room and leisure islands, many small services will support the well-being of our residents. Elegant interior design solutions, stateof-the-art building materials, large terraces and window surfaces, technical and smart home solutions and layouts adapted to the latest international trends will work together to make these homes truly exceptional. What should interested parties do to secure an apartment? JG: Well, I wouldn’t wait! We are just starting construction; residents will be able to settle in during the first half of 2023. There will only be 107 apartments in total and we have sold 20% of those already.
János Gárdai by preserving the magnificence of the monumental main building and creating six additional villas that match the elegance of the central residence. Is the idea to attract today’s Budapest “aristocracy”? JG: That is the plan. Eötvös12 is a unique project, developed for luxury lifestyle lovers. We believe that we are building livable and elegant homes on one of the most prestigious locations of Budapest. The villas are developed in a unique green surrounding, with 3.5 hectares of beautifully landscaped gardens, full of mature trees. It sounds like you are creating a green oasis. JG: The area is abundant with natural forests and green hills and is a very popular place for leisure activities and
excursions. The site itself offers excellent air quality, direct garden access and breathtaking panoramic views. Car traffic will be confined below ground, so it will truly feel like living in a forest. Location and surroundings are always key. What else makes Eötvös12 a unique residence? JG: The villa park will form a link between heritage lifestyle and modernity. Every care has been taken to ensure that residences in both the historic art déco main building (dating from the 1920s) and the six modern villas will be the most up-to-date, elegant, serene and attractive in Budapest. The needs of all types of residents, couples, singles and families, will be met thanks to a variety of well thought-through, exclusive amenities and facilities on site.
Who is the developer of this luxury project? JG: White Star Real Estate has been present in the Central and Eastern European region for two decades, and are an active player in the real estate development and management industry in the Czech Republic, Poland, Romania and Slovakia, as well as in Hungary. In the past 20 years we have developed some 2.3 million square meters in more than 50 successful projects. Our partner Cain International focuses on gateway and opportunity cities in growth markets. The firm’s collaborative approach with established local partners has resulted in an international portfolio of investments, joint ventures, and developments. Cain International has offices in London, New York and Los Angeles. Its U.S. portfolio includes projects in Miami and Beverly Hills, while its European investments span London, Barcelona, Dublin, Krakow, Madrid, Warsaw and now Budapest. Photo by White Star Real Estate
The Normafa area of the beautiful Buda Hills is usually peaceful, but just now you may hear the noise of construction works coming from what was for decades known as the Svábhegy Sanitarium. A new luxury residential area is being created here, one that is certain to attract lovers of life’s finer things. János Gárdai, managing director of White Star Real Estate offers an insight into what is being developed behind closed doors.
Photo by White Star Real Estate
Timeless Elegance High Above Budapest: Eötvös12, a Unique Project Developed for Luxury Lifestyle Lovers
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Special Report
Continued from page 10 ► ► ► and office landlords have to pay much more attention to the needs of their customers. In the future, it will not be enough to just hand over office space to the tenants. However, those who meet these needs for more service can expect more rental income. Because for the customers, too, this means added value that goes far beyond the provision of space. What has definitely changed is that tenants are looking for more flexibility. We saw this trend emerging even before COVID. That is why we already had planned to enhance our office concept. This includes, for example, flexible rental space, which is already reflected in our myhive concept: we will offer even more options for tenants; modern, attractive workspaces of any size with flexible variability. We have had mandatory tasks related to the virus (cleaning, hygiene and elevator rules, plexiglass at the receptions, distribution of masks), but our buildings had served our tenants in all respects in the same way during the previous period. Viktor Nagy Country Manager Operations Immofinanz Hungary We expect that, in the short-term, office demand will decline due to the COVID situation; however, following
Péter Würsching
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Budapest Business Journal | October 16 – October 29, 2020
the crisis, we expect employees to return to the offices, although home office will remain for one to two days a week in the long run. Regarding the leasing terms, we expect more flexibility (contraction/expansion) and shorter rents (seven-to-10-year contracts will not remain) and more focus on employee satisfaction. Péter Würsching Head of Office Agency JLL Hungary All our Hungarian parks, currently nearly fully let, are primarily located next to highways and other strategic transportation routes. Given the success of Prologis Park Budapest-Sziget, we feel confident about further investment in this area. We recently expanded our portfolio with a 13-hectare site, located just across the road from Prologis Park BudapestSziget. Depending on customer needs, we are able to deliver both speculative and BTS facilities. Based on our COVID-19 special report series, we expect that demand slowdown caused by the pandemic will be short-lived as logistics real estate is poised to benefit from the acceleration in the transition to e-commerce. Our research also found that planning for future disruptions could gradually push many industries toward a greater diversity of manufacturing locations, including on- and near-shoring. Lowcost production centers, such as CEE are beginning to see increased interest. However, these changes are likely to be a long-term trend that plays out over several years. One of the challenges is that the number of available spaces is limited, therefore the markets are running into capacity constraints. Another crucial topic in logistics real estate is labor. According to research, labor supply and retention are among our customers’ biggest concerns. We are working to address these pain points by offering more than just warehouse space to our customers: we design our parks to support the wellbeing of their employees, too. Looking at the Budapest market as a whole, we see significant development potential in the South-Pest region, in the area of Szigetszentmiklós [22 km south of the capital] and Gyál [21 km southeast]. If the western and southern regions of Budapest become
Paweł Sapek saturated, further expansion may even shift towards the eastern and northeastern regions of the capital.
supply side, which has an impact on financing as well. This means that the market gets tighter and clearer, in which only the best developments can stay successful. From the beginning we have paid significant attention to develop products that hold their value and stay crisis-resistant in the business, technical, architectural and communal fields. Our BudaPart project keeps proving that residential sales and office leasing have been more than successful despite the pandemic; furthermore, 12 companies have already moved into BudaPart GATE, our very first office building. I think it is too early to talk about a “financial crisis” and if they develop an effective vaccine, then a quick recovery can be expected. In the property market, those players who create such professional products, which are prepared for an accidental crisis from the very first phase, when concepts are only in formation, will be successful in the long run. Furthermore, I think location will remain a key aspect and gain even more focus; therefore, the demand for well-placed and
Paweł Sapek Senior Vice President & Regional Head Central Europe Prologis In my opinion, we have seen this pattern, and gained valuable experience, back in 2008, when the office market was slowing down: tenants expressed the need for moving into newer and more modern office buildings back then as well. To no surprise, premium location and environmentally friendly, green solutions are still appealing on the market, and even though home office was more than inevitable lately, it is not sustainable in the long run for most companies. For now, we have not registered any decline of interest, but a great amount of attention has shifted to experimenting with the optimization of office space. In the housing market, customers and investors are both reluctant to progress, which could be helped by the government’s economy-boosting steps. The fallback of tourism affects us as well, since we are developing a hotel at BudaPart, but as our products are crisis-resistant, we can anticipate changes on the market in a collected manner. COVID affects the whole world’s economy, both on the demand and the
Dr. Mihály Schrancz modern buildings will still be high. BudaPart, as a project with mixed functions offers a complex opportunity for its residents and tenants. Dr. Mihály Schrancz Managing Director Property Market
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Special Report | 13
BudaPart Offices: Much More Than a Workplace This year has posed a number of challenges to the real estate market; therefore, it needs actors properly prepared for a changing environment to respond truly well to them. At BudaPart, along the Danube, Property Market is implementing the largest, city-scale development in the capital today, which is constantly advancing despite the pandemic. BBJ STAFF
In addition to the two residential buildings handed over last year, the first office building in the neighbourhood, BudaPart GATE, opened in February this year and, given its location, also stands as a symbolic gate to BudaPart. The building is already 90% occupied, with 12 domestic and international companies renting office spaces here: Novo Nordisk, Do TERRA, Serviced Office Belbuda, SEMCOM and Atradius, among others, have chosen this nextgeneration office building. The primary aspect of modernday companies is, more than ever, a green and human-centric, innovative approach, which the office buildings of the neighbourhood more than generously offer tenants. The offices have been built using environmentally conscious technologies and energy-efficient solutions, considering the criteria of the LEED “Gold” certification, which BudaPart GATE received a few months after the completion date.
BudaPart CITY Ahead of Schedule
As of today, more than 15,000 sqm of office space has been rented, and the development is moving on as we speak: the second of the 13 office buildings, BudaPart CITY, reached the state of structural readiness in the fall, meaning the building, under construction by Market Építő Zrt., can be completed earlier than planned. The first tenants, including Bayer Hungária, who were among of the first to sign a lease for about 3,200 sqm a year before the handover, will be able to move into the six-story office building in the second half of 2021.
Improving Infrastructure, Public Transport
BudaPart CITY office building around the community and the individual, with the aim of offering a mixture of active urban lifestyle with the relaxing beauty of nature, thereby becoming a place in the capital where both residents and workers love spending time. In this new neighbourhood within Budapest, in addition to the vibrant metropolitan environment and special architectural solutions, the residents and employees of BudaPart can also enjoy the calm waterfront harmony of nature at their fingertips; what’s more, the 20,000 square meter office building offers a unique view of the waters of the bay. BudaPart is undergoing a nearly 10-year development in the vicinity of the Kopaszi Dam, bringing along with it a constant expansion of services. In 2020, a restaurant named BudaPart GATE Melódin opened in the first office building, besides; “Grajnai the florist” recently opened on the
shopping street level of the BudaPart Homes ‘A’ residential building, with a bakery, a supermarket and additional shops also soon coming along in the neighbourhood. The resulting services grant employees the advantage of significant time saved in everyday life with precious minutes or more to spare each day of the week. BudaPart employees can kick off their day with a morning run, arrange their banking, shopping or other to-dos during lunch time, dine with friends at a nearby restaurant, returning in the evening to their home in BudaPart, if they choose to reside here, just a few minutes’ walk from work. All this makes everyday life much easier, so the time saved on traveling or seeing to everyday routines can instead be spent on family, hobbies and relaxation, facilitating the development of well-being and leading to increased employee loyalty in the long run.
In addition to the office buildings and the hotel, 15 residential buildings and 15,000 sqm of commercial space are being built at BudaPart, along with the ongoing development of comprehensive infrastructure elements that make life even easier for residents and office employees, such as traffic light junctions, for example. As you would expect from an investment project of the scale of a neighbourhood, public transport opportunities are also constantly expanding: a MOL BUBI public bike sharing station was established on the side of BudaPart GATE in July, and the neighbourhood will be accessible by yet another bus service later this year, while the development plan of the Southern Circular Railway includes the establishment of a new railway stop called Nádorkert. Phase II of the development of the ‘Budai Fonódó’ tram network will begin soon; thanks to this project, besides bus services, BudaPart will also be available via an interconnected tram line directly from Szent Gellért tér.
Property Market Kft. BudaPart GATE 1117 Budapest, Buda-part tér 2. Tel.: (+36 1) 241-0100
City in the City The location and the proximity of available quality services are increasingly important aspects for both employers and employees, and in the recent period, the need for a green environment has become ever more pronounced among tenants. BudaPart is centered
BudaPart GATE office building
BudaPart 2020 summer
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Industrial Sector Early Winner in Coronavirus Crisis The industrial market in Hungary and the wider region is seen by analysts as the real estate sector in the most positive position for the postcoronavirus crisis. Continued record low vacancy rates and stable rental levels are forecast due to high demand; however, due to the lockdown, many speculative projects have been put on hold despite and the majority of the current pipeline is being developed on a builtto-suit (BTS) basis. GARY J. MORRELL
Although the pipeline of speculative projects in the Budapest area is building up, more preleases are being concluded, allowing construction of projects to go ahead. Industrial and logistics projects have a short delivery time in comparison with other sectors at around six months, assuming all permits are in place, according to Colliers International. The consultancy has traced 162,000 sqm of industrial space under construction with a current vacancy rate of 2.6%. CBRE, meanwhile, has traced 127,000 sqm of space under construction in five projects in the greater Budapest area. The consultancy has a wider definition of industrial and put total stock in Hungary at 736,000 sqm, 25% of which in the Budapest area.
Prologis Park Budapest Harbor Budapest stands fourth among CEE capitals with regard to total industrial stock after Warsaw, Prague and Bucharest, with significantly lower vacancy rates than the top two. The total supply of industrial space in CEE stands at more than 50 million sqm according to Colliers. Cushman & Wakefield expect low industrial vacancy and reasonably stable demand levels for Hungary going forward, with a focus on a BTS and semispeculative opportunities. Those projects that are already underway are expected to be handed over with a delay of one quarter: 47,000 sqm of new space is expected to be delivered in the second half of the year. Key completions for the first half of the year include 23,000 sqm at CTPark South, 18,000 sqm at Wing’s East Gate Business Park, 13,000 sqm at Prologis Park Budapest-Harbor and 10,000 sqm at Budapest Dock Szabadkikötő. Cushman see industrial with a vacancy rate
at
3%
or below for Hungary in a landlord favored market. “We see a record low vacancy rate due to continuously high demand, coupled with a very limited and slowing handover of new facilities. This has opened a window of opportunity again for full BTS development in the Budapest area,” says the consultancy. The industrial development market has been hampered by high construction costs
CTPark Budapest West
and, as a result, the acquisition of properties has been a preferred option. However the options for the purchase of existing buildings are limited and construction costs have arguably fallen. Prime industrial yields for Hungary stand at 7%, making it the second most favored investment option after office. Developers are essentially working on BTS developments, often with a speculative element.
Customer Need
“Depending on customer needs, we are able to deliver both speculative and BTS. The new park, Prologis Park Budapest-Sziget II, has all the necessary building permits and development potential for two modern facilities totaling 60,000 sqm,” says Paweł Sapek, head of Central Europe at Prologis, on its new project. In a recent BTS deal, CTP is developing Chinese computer maker Lenovo’s first European factory in Üllő at CTPark Budapest East industrial park. The EUR 18 million center will house a 35,000 sqm high-tech European plant, scheduled for completion in
spring
2021.
Lenovo selected Hungary for the investment after examining the probabilities of several European locations. The industrial sector in Hungary is generally regarded as underperforming in terms of the volume of deliveries in comparison with other established Central European markets. For example, a Panattoni BTS development has just been undertaken in a regional Polish city, whereas Hungary is lacking in such large scale developments. Panattoni, a leading logistics developer and park operator in CEE is not present in Hungary. Further, a developer-led market is mainly limited to the Budapest area and has not been established outside the capital. Poland for example has five major industrial or distribution hubs. “Contrary to the multi-regional markets of the neighboring countries, the Hungarian industrial market is still highly focused around Budapest. The ratio of modern warehouses built for lease outside of the Budapest I&L [industrial and logistics] market is only around 20%,” comments Kevin Turpin, head of CEE research at Colliers.
“The industrial sector is clearly the winner of COVID year. There has been a limited negative affect on the sector, and great positive potential for growth. The e-commerce sector will constantly grow, as well as the consumer market. Central Europe will attract more development and investment. There is a lot of potential new capital waiting at the doorstep of Central Europe. Developers are in a good position to benefit from these new capital opportunities.” “In the major countryside submarkets, largescale industrial parks comprising several buildings that are operated by international developers are still not typical. The more rural areas tend to be attractive for enduser companies related to manufacturing/ assembling activities,” Turpin adds. Total industrial stock in Hungary as of summer stood at 2.3 million sqm, compared to 19.7 million in Poland, 8.8 million sqm in the Czech Republic and 4 million sqm in Romania. Total stock in Central Europe (Poland, Czech, Slovakia, Hungary, Romania) could soon reach 40 million sqm according to Cushman & Wakefield.
Sustainable Accreditation
Regional industrial developers and park operators are now developing sustainability accredited and more highly specified projects in reaction to changing tenant demands. Prologis, for example, has five BREEAM accredited buildings in Hungary, four at Prologis Park Budapest-Sziget. Another of its development, Prologis Park Budapest-Harbor, boasts amenities
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Budapest Business Journal | October 16 – October 29, 2020
which it says provide a 30% reduction in heating costs, while LED lighting and large skylights cut electricity consumption
by
45%.
It also has electric car charging facilities and direct public transport links. “We expect that in the field of design and construction, sustainable development focusing on both the environmental and social impact will gain more ground in the industry. This transformation has already started. Last year Prologis worked closely with the International Well Building Institute to define a new standard of certification for logistics real estate, the WELL Building Standard, which focuses on social-sustainability through building design,” says Prologis. “These services are the foundation of our PARKlife concept, which is a pilot project that began in five Prologis Parks located in Central Europe, including Prologis Park Budapest-Harbor,” Prologis’ Sapek says. “Over the coming years, we intend to implement the concept throughout all our Prologis Parks in the region. We design all our new developments with BIM [Building information modeling], which gives architecture, engineering and construction (AEC) professionals the insight and tools to more efficiently plan, design, construct and manage buildings and infrastructure,” he explains. “For Prologis it is an essential platform for smart buildings and data governance, which in turn enhances customer experience and drives energy sufficiency as part of our commitment toward carbon
Industry First
“Last year, CTP was the first in the industry to enter into a collaboration agreement for the implementation of the BREEAM In-Use International certification for its entire industrial portfolio,” says the company. “The BREEAM In-Use certification is a science-based sustainability certificate warehousing needs,” said Gábor Futó, the that allows quick comparison of the founder and owner of the Futureal Group. performance of assets across territories.” “The process has been pushed even All new CTP buildings will feature roofs quicker due to the coronavirus pandemic, ready for the installation of solar panels. with customer and investor interest In a further sign of the increasing growing further throughout Europe. We attractiveness of the logistics sector, are confident that HelloParks can achieve Futureal and Cordia have founded a great success even in the short-term, and new industrial and logistics property can improve Hungary’s position in the development and investment company, international logistics market,” Futó says. HelloParks. The firm will operate as a Rudolf Nemes, CEO of HelloParks, adds: member of Futureal Group. HelloParks “As a first step, the company is planning to aims to obtain a leading position, initially develop megaparks around Budapest, later in Hungary and later on in the CEE market. expanding into the countryside, where “The growth of e-commerce and customers can operate warehouses as well shortening of production and supply as light industrial plants.” chains, relocating them closer to target Colliers expects the vacancy rate to increase markets, has significantly increased to slightly above 3% with about 53,000 sqm
Certified sustainable premium office and retail spaces available in downtown Budapest
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neutral developments. In fact, we delivered our first BIM-designed logistics facility in CE in Hungary, at Prologis Park BudapestHarbor. The goal of implementing green solutions is not only to achieve a certain amount of cost reduction; it is part of our customers’ environmentally responsible thinking as well,” Sapek adds. Elsewhere, CTP is adapting its portfolio consisting of almost 300 buildings in six countries in line with applying for BREEAM In-Use certification, and four buildings have been awarded an “Excellent” rating.
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CTPark Budapest West due to be delivered in the greater Budapest area. It says the build-up of speculative developments will provide opportunities for companies looking to quickly source logistics and production facilities. “The industrial sector is clearly the winner of COVID year. There has been a limited negative affect on the sector, and great positive potential for growth. The e-commerce sector will constantly grow, as well as the consumer market. Central Europe will attract more development and investment. There is a lot of potential new capital waiting at the doorstep of Central Europe. Developers are in a good position to benefit from these new capital opportunities,” concludes Ferdinand Hlobil, head of CE industrial at Cushman & Wakefield.
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Budapest Business Journal | October 16 – October 29, 2020
Office Projects Going Ahead Despite COVID Concerns The Budapest office market has been recording favorable indicators with low vacancy, high and consistent demand and in general well-conceived development strategies. The quality of product from an exterior and interior design and sustainability perspective has improved rapidly in response to market demand and sustainability regulations. GARY J. MORRELL
The office market now has to make further qualitative advances in response to the coronavirus crisis in terms of interior design and layout, property and finance management with regard to hygiene and climate quality issues. When, and if, a full recovery in demand and investment occurs remains to be seen. The sector has some of the lowest vacancy levels on record, while at the same time supply has been relatively constrained in comparison with past cycles. Although this year demand is being held back compared to the previous year, a significant proportion of the current pipeline is prelet. The market has a potential pipeline of more than 570,000 sqm in the development of large-scale, phased speculative project by developers such as Atenor, HB Reavis and CPI and Skanska. Further, developers such as Horizon Development, Wing and Codic are due to deliver single standing major projects. Office stock in Budapest now stands at 3.86 million sqm according to the Budapest Research Forum (consisting of CBRE, Cushman & Wakefield, JLL, Colliers International, Eston International and Robertson Hungary). In general developers are delivering projects according to schedule, despite the challenges in the construction and letting processes caused by the coronavirus.
Agora Budapest The overall vacancy rate stands at 8%, a slight rise, although very low compared to previous development cycles. According to Cushman & Wakefield, 48,000 sqm of space is due to be delivered in the second half of the year. New projects are still being undertaken as CBRE has traced 580,000 sqm of space under construction reflecting the confidence of developers despite the COVID-19 virus.
Confidence
about an upswing in the rental market once the pandemic is over so we can resume and continue our value creating real estate development thereafter,” comments Mátyás Gereben, Hungary managing director at CPI. The Váci Corridor continues to be the favored office development destination with an estimated 170,000 sqm of space under construction, according to Cushman & Wakefield: the sub-market has a vacancy rate of 4% and the highest share of take-up in the Budapest office market.
“Ongoing development schemes continue, and no major delays are reported. While the pipeline for the 2020-2022 period shows an increased level compared to the amount seen in the last 10 years, the impact of WFH [work from home] in Budapest remains to be seen on future demand and design. Large-scale transactions, Interconnected Skanska has started development however, have proceeded of the 26,000 sqm first phase of the and we have seen large 65,000 sqm H2Offices, consisting of three interconnected buildings in the occupiers committing corridor. The EUR 65 mln complex for long-term leases.” has been designed by the Danish
“Developments has been able to move ahead largely according to schedule and the handful of newly kicked off projects reflects confidence among investors,” the consultancy comments. In the view of Cushman & Wakefield, demand levels in the Budapest office market have been constrained compared to previous years and dominated by renewals. Further, as new supply is continuing, the vacancy rate has increased from its record CPI is planning an office complex at low at the end of 2019. a site close to Árpád híd. The BREEAM “Ongoing development schemes continue, “Very Good” accredited, EUR 31 million and no major delays are reported. While Balance Hall office development was the pipeline for the 2020-2022 period completed at the turn of the year and shows an increased level compared to forms part of the 35,000 sqm Balance the amount seen in the last 10 years, Office Park; the complex is expected the impact of WFH [work from home] to be close to fully let within a year in Budapest remains to be seen on according to CPI. future demand and design. Large-scale “Although our day-to day lives transactions, however, have proceeded and have been transformed by the we have seen large occupiers committing COVID-19 crisis, we do believe that for long-term leases,” says the consultancy the domestic office market relies in its latest market analysis. on firm fundamentals that will bring
Arrow Architects studio, with Skanska aiming for WELL and LEED “Platinum” accreditation. As with CPI, the developer has successfully maintained a land bank as plots along Váci út have become more difficult to source. In another Váci project, regional developer Codic, in partnership with the Hungarian residential developer, Pesti Házak and the Swiss investment company Picton Group, is due to complete the 20,000 sqm, BREEAM “Excellent” Green Court Office by the end of 2021. The project is already 65% prelet, according to Codic. Continued on page 18 ► ► ►
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Arena Business Campus Continued from page 16 ► ► ► However, with the rising popularity of the area, well-located development sites with direct access to public transportation links have become more difficult to source and leading developers are now looking at other areas of the city that provide similar development opportunities. Bayer Hungária has leased 3,000 sqm at the LEED “Gold” accredited, 20,000 sqm BudaPart City, due to complete next year by Property Market. Bayer chose the project due to its unique location, the quality of the office environment and green area, and the fact that it is a developing business district, according to Pál Tamás, head of office agency and tenant representation at Eston International, who represented the developer in the deal. “I think location will remain a key aspect and gain even more focus, therefore the demand for well-placed and modern buildings will still be high. BudaPart, as a project with mixed functions, offers a complex opportunity for its residents and tenants,” says Mihály Schrancz, managing director at Property Market. “Thanks to being located next to the Danube and Kopászi Dam, we are close to nature and a green environment, but as a result of the neighborhood’s services, everybody can enjoy the urban vibe as well. At BudaPart, we are proceeding according to the plan regarding our office and residential developments: the building of BudaPart CITY and BudaPart Homes ‘E’ in the neighborhood is in progress, which is expected to be handed over in 2021, and we are also planning to start a new office, residential buildings and a hotel as well,” he adds.
Also along the boulevard, Atenor has delivered the 20,000 sqm BREEAM “Excellent” accredited Aréna Business Campus A, the first sqm phase of the speculative, accredited,
85,000 sqm project
in the outer boulevard of Budapest; ground work has already started on a second 14,000 sqm phase of the project. One of the major challenges for office developers in Budapest is to source suitably-sized, well-located development plots that provide visibility at a time when competition for such space is becoming more intense and more expensive. As a consequence of that process, office hubs are now appearing outside the established business areas as developers source new areas of the city with potential. Atenor has started construction of the 18,000 sqm BakerStreet in South Buda, the scheduled hand-over being the second quarter of 2022. “Ongoing developments proceed, no delays can be expected. For example the current constructions of all four of Atenor’s office buildings are ongoing as per the original program,” says Nikolett Püschl, leasing and development director at Atenor Hungary. The company is celebrating the completion of the 120,000 sqm Váci Greens, a phased project consisting of six buildings. Five office buildings have been sold to various domestic and international investors.
Architects and Budapest’s Finta studio will deliver retail and service space and open squares, which is to be utilized by the local population, as well as redeveloping the area adjacent to the Árpád híd metro station. The concept is of a reciprocal benefit to both the developer, companies that locate to the project and the surrounding population according to HB Reavis. “Companies are looking for flexible, safer, healthier multifunctional workplaces and energyefficient solutions focusing on sustainability,” says Zsolt Berényi, acquisition and development director at HB Reavis Hungary. “Ideally, office buildings should organically connect to the environment and serve their users and people in the area in the longer term. HB Reavis has already implemented these values into practice for years. All HB Reavis developments are designed based on BREEAM and WELL criteria,” Berényi adds. Püschl, from Atenor, argues that the key focus for her firm is that its developments will increase the attractiveness of cities and will satisfy the needs and demands of today’s users, working in close cooperation with the authorities to be able to create a symbiosis with the environment and the citizens.
“We may definitely conclude that the demand for high quality, peopleorientated offices offering smart solutions and advanced on-site services has actually increased due to the pandemic. Employees are realizing the value of ensuring the health, wellness and wellbeing of employees in the workplace.” In general, business complexes are expected to integrate into their surroundings by offering service, public squares and green areas that provide a mutual benefit to developers and the surrounding areas. With regard to the development of an office project, the most important factors are seen as the proximity and variety of public transport, the different amenities within walking
distance, the business nature of the district and also accessible green areas nearby. When it comes to transport links, the ideal is a metro within 400 meters.
Office Density
Looking at office density in the pandemic environment, there are two counterbalancing forces with regard to office space; homing working is freeing up space and the density of offices has changed with social distancing requiring more space, according to Gábor Borbély, business development and research director at CBRE Hungary. “Instead of obstacles, we see opportunities, partly due to the pandemic, which created an increase in the demand for human-centered workplaces. This is one of the main factors why the construction and leasing of Agora Budapest continued unabated during the pandemic and there were no cancellations or suspended leasing processes,” says Berényi. “We may definitely conclude that the demand for high quality, people-orientated offices offering smart solutions and advanced on-site services has actually increased due to the pandemic. Employees are realizing the value of ensuring the health, wellness and wellbeing of employees in the workplace,” he explains. “More and more companies realize that the key to success resides in the human factor, so they do their best to create employee-centered, wellbeing enhancing, high standard office ecosystems, where people can pass on information, collaborate and create things together more efficiently,” says Berényi. When it comes to the longer term prospects for office, analysts argue that take up needs to return to its previous levels. There are a number of planned schemes that are ready to be launched and many developers have substantial landbanks that could meet future demand. Furthermore there is a vast amount of local and international equity seeking a home. In this way investors could provide an exit strategy for developers at a time of their choosing when the investment market picks up. Office is expected to continue to be the investment sector of choice, although even when investment activity picks up, market activity will continue to be restricted by a limited supply of investment grade product.
Historic Core
Outer Hub
The outer boulevard of Budapest has developed into an office hub as Wing is constructing the 42,000 sqm Liberty office complex, adjacent to the completed 58,000 sqm Magyar Telekom Group headquarters it also built.
Development plots are particularly difficult and expensive to source in the historic core of Budapest and therefore a central CBD business district has not emerged as it has in Warsaw and is doing so in Bratislava. The Szervita Square Building by Horizon Development that is due to deliver 12,500 sqm of fully leased, LEED “Platinum” accredited office space is a rare office development in the center. Agora Tower and Agora Hub, the first speculative 66,000 sqm phase of the 136,000 sqm Agora Budapest by HB Reavis, designed by the London-based Make
Balance Hall
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Special Report
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Budapest Business Journal | October 16 – October 29, 2020
INSIDE VIEW
Parking Issues in Construction Projects: Additional Task or Unexpected Redemption Fee? László Krüpl (LL.M.)
Attorney, Head of real estate practice – Hungary
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Schoenherr Hetényi Attorneys at Law
Real estate developers are not always aware of a potential obligation in construction law, namely the provision of additional parking spaces if refurbishment works result in an area increase or if there is a function change. But how are additional parking spaces calculated and what shall be done if no additional parking lots can be constructed? The answer is either additional construction works or the payment of a redemption fee. The latter can unfortunately be an unexpected cost, although it can be assessed in the early stages of the process. László Krüpl from Schoenherr provides practical insights on these problems. Governmental decree no. 253/1997 (XII. 20.) on town planning and building requirements (OTÉK) defines the required number of parking spaces. The total for a newly developed building depends on its function and can be calculated as follow: OTÉK defines that one parking space needs to be provided for each guest room of a hotel, each commenced 20 sqm net area of an office building, 1,500 sqm net area of a warehouse or 5 sqm net area of a catering unit etc. Local building laws issued by city, town or municipal districts may deviate from these numbers. For instance, there are local building laws in certain districts of Budapest which stipulate that in case of a hotel development only 50% or 25% of the new parking spaces required by OTÉK should be provided. When determining the number of additional parking lots required in the case of a function change or area increase to existing buildings, although there is no clear rule in the OTÉK, in practice the building authority and the architects follow a very specific method: a socalled theoretical parking number (“elvi parkolószám” or “örökölt parkolószám”) is computed, to which an
existing building would be entitled if it was newly developed, and it is taken as the basis instead of the actually available parking lots. An example for the function change of an existing building: The theoretical parking number of an office building constructed in the 1960s with a 1,200 sqm net office area is 60 (because the current rule sets out 1 parking lot for each 20 sqm of net office area), even if factually only 40 parking lots are available. If such a property were to be turned into a 45-room hotel (where the current rule sets out one parking lot for each guest room), then in fact no additional parking spaces would be required, because the total parking number for a hotel (45) is less than the office building’s theoretical number (60) even if only 40 parking lots are actually available. It is to be noted that in case of function change in historical, protected buildings, no additional parking space needs to be provided if there is no area increase. An example for the area increase in an existing building: If a simple refurbishment project is done in which a 40 sqm kitchen/restroom is turned into a 40 sqm newly developed net office area in a one year old office building, then the developer could easily face the legal obligation to provide two additional parking lots, based on the current rule that one parking lot is required for each 20 sqm of net office area in case the refurbishment is subject to a building permit. If there is no technical possibility to provide the required parking lots, they should be redeemed from the local municipality. The amount and the calculation method are usually included in the local building laws and the regulations vary from town to city or municipal district. For example, the redemption fee of a non-residential parking lot in Budapest’s District VI can amount to HUF 6,325,000/place, whereas in the inner city of Kecskemét, parking lots were redeemed following an individual negotiation for HUF 810,000/piece. The parking number balance (“parkolómérleg”), i.e. the number of required parking spaces, needs to be calculated and established by the architect in the technical description as part of the building permitting documentation and should be verified on a case-by-case basis by the building authority. In any case, it needs to be carefully assessed whether the planned construction activity results in an obligation to provide additional parking lots. If these cannot technically be provided, an associated redemption cost should be anticipated.
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Green Court Office Topped-out Regional developer Codic has celebrated the topping out of the 20,000 sqm Green Court Office, located in the ever popular Váci Corridor. The complex has also been awarded interim BREEAM “Excellent” certification. The project is being developed in partnership with the Hungarian residential builder Pesti Házak and Swiss investment company Picton Group. GARY J. MORRELL
“In recent months, despite the pandemic situation, work has progressed at full steam. Thanks to this and the hard work of an average of 100 people a day, the implementation of Green Court Office is proceeding as planned,” says Codic. “The mixed-function development pays special attention to the creation of urban ecological values and the application of environmentally conscious solutions. Located by Kassák Park,
65% of the
office areas in Green Court Office have already been leased, showing undiminished demand for prime buildings,” the company adds. Christophe Boving, CEO of Codic Hungary, explains “Green Court is a prime, new generation development: an innovative concept of four buildings set around a large green, inner courtyard, accessible from four sides. We are committed to ensure that the recent interim BREEAM ‘Excellent’ rating Green Court Office obtained will be granted again at completion of the building.” Electric car charging stations have been installed in the underground garage and on the ground floor, in addition to 100 plus bicycle parking racks with changing rooms and showers. The complex is going ahead despite concerns early in the pandemic that the coronavirus crisis would put a stop to, or significantly delay, progress in construction projects. However, most Budapest office projects are progressing as planned, according to developers. In the current market environment, developers do need to work more closely with architects and constructors throughout the project, however.
Huge Challenge
“Constructing an office building, especially such an environmentally conscious green office building, is always a huge challenge,” comments Zoltán Sáray, CEO of KÉSZ, the constructor of the project. “From the first moment of construction, our job is to keep the needs of the investor and future occupiers in mind and try to construct the most modern and most comfortable building. Although the building is not finished yet, the team has done an excellent job, which is greatly enhanced by our exemplary cooperation with Codic Hungary,” Sáray adds. According to Codic, the design of the complex not only focused on energy-saving, environmentally conscious solutions, but also paid increased attention to creating a healthy work environment as well. “Codic is looking into the introduction of custom technical solutions, such as placing a sterilization filter in the mechanical system and implementing contactless access from the main entrance to the work stations,” Sáray explains. “A full height glass façade with an area of 6,800 sqm, ensures as much natural light in the office as possible,” he adds. The implementation of such technical features has resulted in a
20% increase
in development costs, according to Codic. The complex has been penned by Miklós Dombi and Tamás Pintér from DPi design Kft. “The design process is about co-creation. During the preparation and planning, dozens of engineers, architects, real estate developers, the chief architect and members of the design council worked for a common goal: to create a positive, healthy and humane environment for prospective employees,” concludes co-founder Pintér. Green Court is scheduled for completion at the end of 2021.
Green Court Office
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Budapest Business Journal | October 16 – October 29, 2020
Industrial Sector 1 of Most Sought After CEE Assets
INSIDE VIEW
Dr. Szilvia Andriska
Senior Associate Real Estate Investments
Photo by Roman Zaiets/Shutterstock
Noerr and Partners Law Firm
The industrial and logistics real estate markets across the CEE-17 (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, North Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia) are all at different stages of maturity, both in terms of size and the pace of development. The total supply of modern industrial and logistics (I&L) stock across the region is
well over
50 million sqm
in total. From this supply, the current availability can be categorized as low, with the majority of markets recording vacancy rates of below 5%. “Demand from the I&L sector in the CEE region over the past few years has overall been strong and has been driven by the 3PL [third party logistics], retail and distribution sectors, followed by the light production, automotive and FMCG sectors,” explains Kevin Turpin, regional director of CEE research at Colliers. “During the pandemic and looking forward, we do expect to see some changes to the order and volume of this demand with sectors such as e-commerce, data centers and specialist storage increasing their requirements. Despite this, the CEE region has a long industrial tradition and remains very attractive to manufacturers ranging from the full spectrum of automotive parts, through to aerospace, metals and plastics, complex electronics, home appliances, food, beverages, pharmaceutics and medical equipment,” he says. “While we expect e-commerce to grow at a more rapid pace and drive demand through
these challenging times, we also expect that, over the longer term, we will see greater demand from producers/manufacturers to bring back parts of their supply chain closer to Europe to mitigate certain risks that we have seen in the past few months. In future, this may mean that larger inventories are stored or produced closer to the end consumer, which could also translate to greater demand for I&L space,” Turpin adds. Industrial yields for Hungary are put at 7%, compared to 5.25% for Czech Republic, 6.25% for Poland and 8-8.25% for Romania.
Record Levels
Lukáš Hejduk, partner and head of real estate in CEE for law firm CMS, comments that industrial output is near record levels in most countries in the region and that it is undeniable that CEE has become a magnet for manufacturing and logistical operations. Countries here have attracted significant levels of foreign investment, thanks in part to the region’s well-educated work force, rapidly developing infrastructure and the lower labor costs compared to Western Europe. In addition, there are bespoke legal incentives available to I&L investors in many countries. However, the report does comment that some of the key challenges in this sector include the availability of land and property in locations that meet both the developers’ and end-users’ expectations, along with the availability and reliability of utilities, connectivity to transport infrastructure, the availability and skills of the labor pool, and access to investment incentives. “The CEE region has always been among the first destinations in the minds of foreign investors from the production and logistics sectors when looking for savings on personnel costs and availability of workforce,” concludes the report.
Although the COVID19 pandemic results in a slowdown or even recession in the economy, there are still market players that are stable and even generating new investments, due to lack of available production, storage or other capacities. Many of these choose greenfield projects from the possible investment forms for realization of their plans. Indeed, numerous companies planning acquisition of existing production facilities have instead turned to greenfield projects because this allows to best realize tailor made plans. Companies undertaking greenfield investments are mainly closely involved from the very beginning. These projects require not only monitoring by the company itself, but the continuous and intense cooperation of all parties, such as the internal project management of the investor, engineers, designers, contractors, financial experts and lawyers. The first step on this long road is the site selection process. The outcome of this is rather determined by business, logistic and other aspects aiming at the cost effective operation of the future plant, and of course by the availability of workforce. New investments providing a substantial number of new workplaces may expect state aid. With regard to that, the results of negotiations with different partners has a massive impact on the project; the involvement of participants, especially lawyers, from the beginning is crucial. There are well known and favored cities which already have experience in attracting foreign investors, while others will be meeting this situation for the first time. Regardless, a feature of all greenfield projects is that they are time sensitive: the investor is bound by strict deadline, by which time the plant needs to be operational and delivery deadlines can be kept. Whether or not a site will be
selected depends in many cases on the status of the given land: whether it is agricultural land or an area no longer used for this and thus removed from this classification, for example. The project can speed up if an economical, industrial property is already at hand with the right building parameters. Although the time pressure is huge, a thorough due diligence procedure is essential. The process itself has to cover not only legal and technical questions, but also whether there are any environmental issues, how access to the plot can be ensured, whether there are any special rules to be met from water regulations or a nature conservation point of view, to mention a few. An accurate preliminary survey can help properly estimate the costs of the investment and prepare for future phases. Naturally, the purchase price will be clarified in the course of the negotiations and defined in the agreements to be signed. In connection with construction on an untouched property, archaeology is also a factor: based on the current laws, in most cases the investors of greenfield projects need to procure preliminary archaeological documentation. The preparation of such a document in some cases requires certain archaeological excavation works, which, in the worstcase scenario, can take months. Places where the seller already has such documentation may be given a preference during the site selection process. After the due diligence, the preparation and drafting of various agreements which have not been signed yet, can follow. The consultancy agreements, cooperation agreements generally are being performed by that time. All the agreements, such as the preliminary sale and purchase agreement, the sale and purchase agreement, and finally, the work and related contracts all serve as a tool for the investor to achieve the best and fastest way to implementation the investment. These agreements need to be worded properly with the purpose of completing the investment within the deadline prescribed. This includes that, although COVID-19 requires special health and safety conditions to be fulfilled, the agreements should not allow the construction companies to avoid their obligations by simply referring to the difficulties caused by COVID-19. Greenfield projects represent the realization of a complex investment envisaged by the investor, with the addition of divergent efforts by all participants; this is one of the reasons making these projects evergreen.
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Greenfield Projects: Evergreen Projects
Industrial buildings are the most sought after investment assets after office and residential according to “ExCEEding Borders: Industrial & Logistics Market in CEE-17”, a report by Colliers International, CMS and Randstad. The research discusses key trends, challenges, technologies, as well as labor market and investment incentives in the CEE industrial sector.
GARY J. MORRELL
Special Report | 21
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Special Report
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Budapest Business Journal | October 16 – October 29, 2020
Hotel Development Badly hit by Ongoing Crisis The hotel and hospitality sector is seen as one of the most severely hit by the coronavirus with the negative impact of the crisis and subsequent lockdown and government restrictions on international travel. GARY J. MORRELL
That said, a large number of hotel development projects in Budapest and the wider Hungary are ongoing and the sector has attracted developers and investors ADVERTISEMENT
Ibis Styles Budapest Airport Hotel from the more traditional commercial property sectors seeking long-term partnerships with hotel operators for the day-to-day operation.
Although hotel delivery time pipelines can be difficult to access, a situation made more difficult by the coronavirus, CBRE has revised pipeline figures in the wake of the pandemic.
The consultancy expects a maximum of 1,800 rooms to be delivered in 2020 with delivery dates slipping and other projects put on hold with no new delivery dates.
3
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Until recently, hotels had been one of the development sectors of choice: there are now
1,700 projects
across Europe representing 300,000 new rooms, according to Top Hotel Projects, with Central Europe one of the core destinations. “Prior to March 2020 we were in the Golden age of the modern history of the Hungarian tourism industry,” says Attila Radvánszki, director of Horwath HTL Hungary. Hungary had been hoping to exceed the 16 million airport passengers who visited the county in 2019 before the borders were closed for the first time. The overall hotel occupancy rate for Budapest fell to 30% in the first half year from an overall rate of around 85% for the second half of 2019 in Budapest.
Worst on Record
“It is worth mentioning that the available stock has also tightened, due to closings caused by the stay-at-home order and in general by the pandemic, but Budapest hotels heavily relying on foreign travelers, suffered the worst six month period on record,” comments CBRE. When, exactly, the sector will recover from a development and investment perspective remains to be seen, although, the importance of the industry to national income cannot be underestimated. According to Horwath HTL and the Hungarian Hotel and Restaurant
Association, a return to last year’s level of hotel business activity and gross operating profits (GOP) is not expected until 2023-2024 in Budapest and 20212022 outside the capital, based on a survey of hoteliers. In 2019, hotel and hospitality represented an estimated 13% of GDP for Hungary employing 400,000 people with guest nights at more than 23 million. For January and February in the pre-pandemic period, gust nights were around 20% up on the previous year. CBRE monitored a pipeline of 3,750 hotel rooms across 32 schemes in Hungary,
85% of which
are in Budapest, before the onset of the international coronavirus emergency. Hotels that rely on international air travel have to look to a longer-term recovery in tourism. Other major issues facing the industry will be health measures that will have to be introduced before businesses can return to some semblance of normality. “Hotel has a heavy pipeline and a number of projects at different stages of development are now on-hold in the development process. It makes sense to suspend projects as there is no reason to hurry the fit-out,” comments Gábor Borbély, business development and research director at CBRE Hungary. The biggest pipeline project is the five-star, 250-room Marriott Autograph Collection in Budapest. The largest project outside the capital is the 123-room, HUF 4 billion Hunguest
“It is worth mentioning that the available stock has also tightened, due to closings caused by the stay-at-home order and in general by the pandemic, but Budapest hotels heavily relying on foreign travelers, suffered the worst six month period on record.” Hotel Sóstó in Nyíregyháza (230 km northeast of Budapest) by the Hungarian hotel chain, Hunguest.
Regional First
In the mid-range segment of the hotel market, the German Deutsche Hospitality, in conjunction with the B&L Group, is developing the 300-room and six conference room, three-star InterCity Hotel Budapest, its first in the region, at the Keleti Railway Station. The Hungarian developer Redwood Real Estate Holding has agreed a management contract with Hard Rock International for the operation of the 140-key Hard Rock Hotel Budapest in Nagymező utca in District VI. The four-to-five star “life-style” hotel, designed by the Hungarian Studio 100,
Special Report | 23 will include a Hard Rock Café restaurant with up to 120-seating capacity. In addition to contributing to GDP, hotel development has acted as a vehicle for redevelopment and preservation of the historic center of Budapest. In a recent major renovation/regeneration project the Hungary-based, Jordanianowned hospitality developer Mellow Mood has opened the long-awaited, 110-guest room and
18 suite
Párisi Udvar Hotel in central District V. A franchise agreement has been concluded with Hyatt Unbound Collection. The hotel market is attracting investors who were traditionally not concluding hotel acquisitions. One such example is the Hungarian-American owned investment manager Indotek, which has purchased the Art Nouveau, 230-room Gellért Hotel overlooking the Danube. The fund plans to refurbish the landmark building and upgrade the hotel to five-star status. The hotel sector has seen a sharp decline in investment activity across Europe with uncertainty for the short-term according to Cushman & Wakefield. However investors in general show a more positive sentiment towards the sector in the long-term. “As Hungary performed exceptionally well in 2019, Budapest is ranked high among international travel destinations, so the recovery will be even faster than in other Central European capitals,” concludes Laurent Lassier, head of hotel at CBRE Hungary.
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24 | 3
Special Report
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Retail Faces Major Challenges The retail sector (along with hotel and hospitality) is seen as being under most threat in the COVID pandemic and its potential aftermath. Although hotels are expected to make at least a partial come back, retail is faced by the additional longerterm challenge of the growing spread of ecommerce and the need for shopping center owners to adapt their malls to meet changing demands. ADVERTISEMENT
“Footfall in prime shopping center schemes is around 50% of pre-COVID and Hungary is a long way behind the rest of Europe in terms of online retail share, but the growth is expected to be much quicker,” comments Cushman & Wakefield on the first half of 2020. The consultancy puts retail stock in Budapest at 770,000 sqm with pipeline represented by one major shopping center development, the first in several years and subject to a number of postponements. JLL put total modern shopping center stock in Budapest at 720,000 sqm, which is low by European standards and represents a total shopping center density of 440 sqm per 1,000 inhabitants.
Rescheduled Handover
Allee shopping center
GARY J. MORRELL
The shopping center markets in Budapest and other Central European capitals are seen as consolidated in terms of total stock, with center owners and investors instead concentrating on upgrading and extending their products to meet the changing market requirements. From a demand perspective, the Hungarian retail market had been recording positive retail indicators as retail sales increased steadily in the
post-economic crisis era. The top tier of Budapest shopping centers all had waiting lists for new spaces and there have been no significant deliveries for several years, with a number center owners planning to undertake reconstructions. Analysts had long argued that a new shopping center project that freshens up the Budapest retail offering would be welcome. International retail developers such as ECE Development and Echo Investment had planned shopping center developments for the capital, but they have been abandoned in recent years.
The 55,000 sqm Etele Plaza by the Hungarian developer Futureal has a rescheduled handover of Q4 2021 or Q1 2022, when potentially the market could improve. The complex, designed by the Hungarian Paulinyi and Partners and the Budapest studio of the international Dyer Group, will include around 180 retail outlets located at a transport hub at the Kelenföld railway station, metro line 4 and the approach section of the M1-M7 motorways. In addition to the retail and service elements, the overall project will include the phased, 65,000 sqm Budapest One Business Park. According to Futureal, the site, located in the west of Budapest, has 236,000 people within a 10-minute traveling distance; a further 165,000 passengers are estimated to travel through the transport hub on a daily basis. “Amid the challenges raised by the pandemic, the development of Futureal’s EUR 300 million Etele Plaza is still in
3
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Etele Plaza, designed by Paulinyi-Reith & Partners. progress with full capacity and expected to open by autumn next year. Meanwhile, to date, more than three quarter of the rentable area has been leased to high-profile tenants including some of the largest fashion retailers,” says comments Futureal. “Spanish fashion giant Inditex Group’s international brands available in Hungary including Zara, Zara Home, Stradivarius, Pull&Bear, Bershka, Oysho and Massimo Dutti have joined Etele Plaza as anchor tenants,” the developer adds. Analysts generally have a positive view of the development from the perspective of location, tenant mix, potential footfall, sustainability and exterior and interior design. “Due to its excellent location as well as the unique digital, sustainability, health and safety features there is a huge demand among retailers for the unique business opportunity and experience Etele Plaza can offer to them,” says Tibor Tatár, CEO of Futureal. “As a result, we have already successfully leased most of the rentable space and we are in negotiation with many promising partners. The complex was scheduled to open earlier had not it not been for the pandemic and subsequent lockdown,” he adds
into the market, which can easily lead to an organic refreshment of tenant-mixes across the country,” says CBRE. Having been the dominant investment destination along with office, investors are now reluctant to invest in the retail sector, initial due to concerns over the growing popularity and use of ecommerce and subsequently because of the COVID-19 virus.
“New developments are going to be mainly mixed-use urban projects combining retail, leisure, offices, residential and hotel use. Also, there is still a potential for extra-large destination shopping centers including all elements of a small city center including entertainment.”
No new Entrant
The first half year was the first time in the past 10 years without a new entrant in the retail market according to CBRE. A combination of availability and 10-20% falls in prime rents could be seen as an opportunity for retailers to enter the market in 2021. “Leasing demand remained fairly positive over the first half of the year, vacancies provide more options for brands looking to expand, relocate to better locations or entry
These issues have substantially reduced investment activity in the sector. Due to the current economic and business uncertainty, most investors prefer a wait and see approach. Banks have been unwilling to provide finance for retail projects. Even while developers and shopping center operators are devising new retail concepts and designs to meet the perceived
threat from e-commerce and changing consumer and retailer demands, they are also now adapting centers to meet the challenges of the coronavirus pandemic. Thus NEPI Rockcastle, the South African investor and developer with assets across the CEE region, is set to modernize and expand its Budapest purchases, Aréna Plaza (since renamed Arena Mall) and Mammut, in response to the current market needs. “The buildings are frequently ventilated with 100% fresh air and additional cleaning and surface disinfection protocols are performed regularly. Frequently used furniture and equipment are disinfected hourly. Furniture in common areas is limitedly available for visitors to decrease the possibility of getting close,” comments Erna Balla, operations asset manager at NEPI Rockcastle in Hungary. “Besides the above, the owner has placed hand sanitizing dispensers at numerous busy points in the properties. Shoe sanitizing mats are laid at all entrances of Mammut and mobile germicide lamps are disinfecting the air at the restrooms while in Arena Mall this is done by ozone ionic machines,” Balla explains. “Social distancing rules are enforced through sticker markings in seating areas, corridors, elevators, and escalators. Operational staff, management staff, sales staff and all visitors are obliged to wear face masks and apply all other precautionary measures when entering. Both for Arena Mall and Mammut, it is extremely important that visitors feel safe and secure, so we are implementing the highest hygienic measures in our buildings,” she adds.
Major Trend
Complexes that mix commercial, service, leisure and residential elements or with direct access to residential could be seen as the major retail development trend. “New developments are going to be mainly mixed-use urban projects combining retail, leisure, offices, residential and hotel use. Also, there is still a potential for extra-large destination shopping centers including all elements of a small city center including entertainment,” comments Jan Kotrbáček, head of CEE retail at Cushman & Wakefield. Another trend is that retail parks have been doing relatively well in the crisis. “Our Stop Shop portfolio is completely stable, it can be said that the general retail turnover returned to the pre-crisis level, and even exceeded in some segments,” says Viktor Nagy, country manager for operations at Immofinanz Hungary.
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Special Report | 25 “Our tenants benefit greatly from the generally low rental and operating costs of Immofinanz’s cost-effective retail concepts, which include Stop Shop retail parks. We see that a good tenant mix and affordable comfort products have been playing an important role in a successful return,” he continues. “In our view, customer habits have changed somewhat; the basket value has increased, meaning that during a single purchase, customers visit more stores and buy slightly larger quantities at once. During and after COVID, shoppers were more likely to turn to ‘open space’ shopping parks than to the regular ‘closed’ malls,” Nagy explains.
Etele Plaza Although there has been a step change in the number of customers shopping online, and the market share of ecommerce across Europe is expected to reach 15% according to Savills, penetration in the Hungarian retail market is lower, indicating that Hungarians still like to shop in a physical store, despite concerns over the pandemic. Euromonitor estimates the ecommerce penetration figure for Hungary to be 7.3% for 2021 and 7.7% for 2022, while it will be 10.9% and 11.7% respectively for the CE-5 (Poland, Czech, Slovakia, Hungary and Romania). Regarding the threat of ecommerce to the retail sector, Gábor Borbély, business development and research director at CBRE Hungary, sees shopping center owners as needing to redevelop in order to survive in the post pandemic period. Malls will, for example, require pick up points and larger storage facilities, he says.
26 | 3
Special Report
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Asset Management Companies totAl vAlue oF pRopeRty MAnAged in HungARy in 2019 (HuF Mln)
MAin pRopeRties MAnAged in H1, 2020
23,290
A
A
A
ReCeivAbles MAnAgeMent
pRojeCt MAnAgeMent
ACCounting seRviCes, ContRolling
RetAil
industRiAl
oFFiCe
oWned by Clients
oWneRsHip (%) HungARiAn non-HungARiAn
Hotel
oWn pRopeRty
top loCAl exeCutive CFo MARketing diReCtoR
otHeR
ConstRuCtion site
AddRess pHone eMAil
–
A
A
A
A
A
–
100
WING Zrt. (100) –
lászló vágó Gyula Jászai György Miklósi
1095 Budapest, Máriássy utca 7. (1) 299-2150 info@ neopropertyservices.hu
208
Telekom HQ, Ericsson HQ, Infopark B-CD-I, Szerémi office building, Gizella Campus, Honvéd Center, Máriássy Ház, ibis Styles Budapest Airport Hotel, Agria Park, East Gate Business Park, Login Business Park
-
11,3
42,3
44,2
2,
-
A
A
Wingholding Zrt. (100) –
noah M. steinberg – –
1095 Budapest, Máriássy utca 7. (1) 451-4760 info@wing.hu
A
Mammut, Park Center, Nordic Light, Váci Corner, West End Business Center, BSR Center, NIPÜF industrial parks, Deák Palota, Fashion Street, Krisztina Palace, Residence I, II, Váci Greens D, Office Garden I, II, Hotel Achat
–
A
A
A
A
A
A
A
– (100)
gergely pados – Orsolya Németh
1052 Budapest, Deák Ferenc utca 5. (1) 268-1288 info.budapest@ cushwake.com
Balance Office Park, Gateway, Arena Corner, Airport City Logistic Park, Pólus, 224,000 Campona, Europeum, Mamaison Hotel Andrássy, Andrássy Palota
–
–
42.80
9.90
43.50
3.80
–
100
–
– CPI Property Group (100)
Mátyás gereben Tamás Pók Bea Déri
1138 Budapest, Dunavirág utca 2–6. (1) 225-6600 hungary@cpipg.com
Hubert Mühringer Ágnes Horváth Rita Szabó
1077 Budapest, Wesselényi utca 16. (1) 479-6020 rita.szabo@ addvalgroup.com
www.neopropertyservices.hu
2
3
Wing ZRt.
www.wing.hu
CusHMAn & WAkeField neMZetköZi ingAtlAn tAnáCsAdó kFt.
4,036
3,450
A
A
www.cushmanwakefield.hu
Cpi HungARy kFt. www.cpigroup.hu
4
5
2,248
AddvAl kFt.
www.addvalgroup.com
1,100
A
A
A
A
–
–
-
50
-
50
-
-
-
100
AddVal Kft. (100) –
A
myhive Átrium Park, myhive Thirteen | Globe, myhive Thirteen | Xenter, myhive Greenpoint 7, myhive Haller Gardens, Optima A, Office Campus, Szépvölgyi Business Park, Globe 3, 14 STOP SHOPs in Hungary
-
61
-
39
-
-
100
-
– Immofinanz AG (100)
viktor nagy, ottó vörös – Zita KovácsBertók
1134 Budapest, Váci út 45. (1) 236-0435 mail@immofinanz.com
A
Millennium Towers I, II, III, H, City Gate, Capital Square, IP West, Bartók ház, Canada Square, Víziváros Office Center, R70 Office Complex
–
–
–
100
–
–
100
–
– CA Immobilien Anlagen AG (100)
ede gulyás – –
1092 Budapest, Köztelek utca 6. (1) 501-2800 office@caimmo.hu
iMMoFinAnZ seRviCes HungARy kFt. 6
www.immofinanz.com, https://myhive-offices. com/hu/home
981
A
CA iMMo HungARy kFt.
www.caimmo.com 7
832
A
poRtFolio poRtFolio diveRsiFiCAtion diveRsiFiCAtion ACCoRding to type oF ACCoRding pRopeRty MAnAged (%) to oWneRsHip stRuCtuRe (%)
tenAnt MAnAgeMent
seRviCes oFFeRed in pRopeRty MAnAgeMent
poRtFolio, pRopeRty And ReAl estAte MAnAgeMent
neo pRopeRty seRviCes ZRt.
net Revenue FRoM Asset MAnAgeMent in 2019 (HuF Mln)
1
CoMpAny Website
totAl net Revenue in 2019 (HuF Mln)
RAnk
Ranked by total net revenue in 2019 (HUF mln)
net Revenue FRoM Asset MAnAgeMent in 2019 (HuF Mln)
totAl vAlue oF pRopeRty MAnAged in HungARy in 2019 (HuF Mln)
MAin pRopeRties MAnAged in H1, 2020
303
A
A
Eiffel Square, Hegyvidék shopping center, Buda Business Center, Amfi Center
indotek gRoup www.indotek.hu
M7 ReAl estAte NR HungARy kFt.
ConstRuCtion site
oWn pRopeRty
oWned by Clients
oWneRsHip (%) HungARiAn non-HungARiAn
top loCAl exeCutive CFo MARketing diReCtoR
95
Individuals (100) –
Csaba széll Anita Molnár-Széll Zoltán Balla
1123 Budapest, Alkotás utca 53. (1) 785-4985 info@celand.hu
Corporate finance management
–
1
99
–
–
–
100
(45) Alan A. Vincent (55)
Alan A. vincent – –
1133 Budapest, Árbóc utca 6. (1) 225-0912 cszeley@ convergen-ce.com
–
–
80.50
19.50
–
–
100
Individuals (100) –
tibor gasser – –
1093 Budapest, Közraktár utca 30. (1) 382-7560 office@gamma-am.hu
ACCounting seRviCes, ContRolling
5
pRojeCt MAnAgeMent
-
ReCeivAbles MAnAgeMent
-
–
A
Real estate asset management, rental, economic and financial building management, real estate management
A
A
A
A
–
–
A
A
A
A
A
100
–
A A
dániel jellinek – –
1148 Budapest, Kerepesi út 52. (1) 688-1700 indotek@indotek.hu
A
Bartók Udvar office complex, Polgár industrial park, Karcag Technology and industrial park, Kecskemét southern industrial park, Kecskeméti western industrial park, Tiszaújváros development area
–
–
–
45
15
5
35
100
–
Székely family (100) –
ádám székely – Emese Horváth
1115 Budapest, Bartók Béla út 105–113. (1) 481-4530 info@infogroup.hu
A
Aerozone Business Park, Csillag Center, Gödöllő Business Park, Eger Business Park 2
–
–
–
–
A
A
A
A
A
100
–
– M7 Real Estate Europe Limited (100)
balázs Magyar – –
1013 Budapest, Krisztina körút 32. (1) 701-4050 info-hu@m7re.eu
–
–
7
–
58
35
–
100
–
– CEE PropertyInvestment Immobilien GmbH (100)
géza barabás Tímea Földi –
1051 Budapest, Bajcsy-Zsilinszky út 12. (1) 429-5050 office@simmoag.hu
–
–
–
–
–
–
100
–
–
100
–
– Revetas Capital (100)
tomasz lisiecki Bálint Brenner Dániel Jávor
1132 Budapest, Váci út 30. (1) 456-6200 info@trigranit.com
A
A
A
A
A
A
A
Office buildings: Blue Cube, Buda Center, City Center, Maros BC, Pódium, River Estates, hotel: Budapest Marriott Hotel
A
A
A
Millennium Gardens
tRigRAnit
A = would not disclose, NR = not ranked, NA = not appliacable
85
A
www.simmoag.hu
NR FejlesZtési kFt. www.trigranit.com
-
A
www.m7re.eu/hu
s iMMo ApM NR HungARy kFt.
10
A
inFogRoup
NR MAnAgeMent kFt. www.infogroup.hu
Rental management
Riverpark, Andrássy 93, Andrássy 100, K6, Merkur Palota, Artotel, Ausztria Ház
www.gamma-am.hu
NR
Hotel
gAMMA NR pRopeRties kFt.
A
oFFiCe
A
industRiAl
www.convergen-ce.com
RetAil
NR
otHeR
A
Kálvin Square Office Building, CityZen Office Building, M7 Tárnok Business Park, Árpád Center Office Building, ZenGarden Office Building
ConveRgenCe
poRtFolio poRtFolio diveRsiFiCAtion diveRsiFiCAtion ACCoRding to type oF ACCoRding pRopeRty MAnAged (%) to oWneRsHip stRuCtuRe (%)
AddRess pHone eMAil
tenAnt MAnAgeMent
www.celand.hu
seRviCes oFFeRed in pRopeRty MAnAgeMent
poRtFolio, pRopeRty And ReAl estAte MAnAgeMent
Ce lAnd MAnAgeMent kFt.
totAl net Revenue in 2019 (HuF Mln)
RAnk 8
CoMpAny Website
Special Report | 27
3
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
This list was compiled from responses to questionnaires received by October 15, 2020 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
28 | 3
Special Report
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Real Estate Developers Ranked by total net revenue in 2019 (HUF mln)
5,872
–
–
–
–
A
Liberty office building (2021), Siemens-evosoft HQ (2021), B&B Hotel (2021), Gizella Loft (2020), Kassák Residence (2020), Kassák Passage (2022), Metropolitan Garden (2020), Park West I (2020)
–
–
–
–
–
aDDREss pHonE Email
–
Árkád 1. Budapest, Örs vezér tere, (2002) Árkád Pécs, (2004), Árkád Győr, (2006), Debrecen Fórum, (2008), Árkád Szeged, (2011), Árkád 2. Budapest, Örs vezér tere, (2013)
A
– ECE Projektmanagement International GmbH (100)
Christoph augustin, marcus janko, Dr. nóra kismarci, györgyné szilvásy, gabriella szarka, mária verebélyi Györgyné Szilvásy –
1106 Budapest, Örs vezér tere 25/A (1) 434-8200 info@ece.hu
East Gate Business Park C (2020) Magyar Telekom HQ (2019) Ericsson Ház (2017), ibis Styles Budapest Airport Hotel (2017), East Gate Business Park B2 hall (2017), E.ON HQ (2016), A66 office building (2015), Hegyvidék shopping center (2012), Dél-pesti Business Park F hall (2012), Allianz HQ (2010), Millenáris office buildings (2009)
Magyar Telekom, Siemens, evosoft, Ericsson, Wizz Air, TÜV Rheinland
Wingholding Zrt. (100) –
noah m. steinberg – –
1095 Budapest, Máriássy utca 7. (1) 451-4760 info@wing.hu
–
Corvin Promenade, Nokia Skypark (2016), Vision Towers (2015), Corvin Corner (2015), Corvin Towers (2010), Corvin ONE (2008), Corvin Technology Park – 2018/2019 Advance Tower 1-2 2018/2019 BudapestOne Phase 1 – 2020
A
GLOREMAN Vagyonkezelő Zrt. (100) –
tibor tatár Róbert Karli Tímea Szili
1082 Budapest, Futó utca 47–53. (1) 266-2181 info@ futurealgroup.com
–
Flórián Udvar office building 2008, Castrumház (residential and office building development) – 2009, Harsánylejtő Kertváros site development phases 1-2, Ü48 office building, Pasa Park
A
(100) –
kristóf berecz Róbert Hrabovszki –
1033 Budapest, Polgár utca 8–10. (1) 332-2200 info@bif.hu
Sasad Liget 1st phase (2008), Sasad Liget 2nd phase (2010), Sasad Liget 3rd phase (2018), Garibaldi Residence (2009), Audi Logistics (2014), Parkway Offices (2009), Broadway Residence (2017)
A
Biggeorge Property Zrt. (100) –
tibor nagygyörgy – –
1023 Budapest, Lajos utca 28–32. (1) 225-2525 info@biggeorge.hu
Balance Hall (2019), Airport City Logistics Park building E-F (2019), Gateway Office Park (Budapest, 2018), Quadra (Budapest, 2017), Balance Loft (Budapest, 2017), Balance Building (Budapest, 2016)
A
– CPI Property Group (100)
mátyás gereben Tamás Pók Bea Déri
1138 Budapest, Dunavirág utca 2–6. (1) 225-6600 hungary@cpipg.com
A
– Real estate funds (100)
paweł sapek – Marta Tesiorowska
1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700 info-hu@prologis.com
assEt managEmEnt
REal EstatE bRokERagE
ConDominium opERation
built-to-suit DEvElopmEnt
REal EstatE utilization
REal EstatE invEstmEnt
ConstRuCtion
pRojECt managEmEnt
poRtFolio managEmEnt
FaCility managEmEnt
publiC builDing
inDustRial
inFRastRuCtuRal
REsiDEntial
CommERCial
oFFiCE –
ongoing pRojECts in HungaRy (invEstED valuE in HuF, ExpECtED yEaR oF ComplEtion)
top loCal ExECutivE CFo maRkEting DiRECtoR
ECE pRojEktmanagEmEnt buDapEst kFt.
aCtivitiEs anD sERviCEs
oWnERsHip (%) HungaRian non-HungaRian
1
Company WEbsitE
total nEt REvEnuE in 2019 (HuF mln)
Rank
typEs oF invEstmEnt
www.ece.com
2
3
Wing zRt.
www.wing.hu
FutuREal managEmEnt szolgáltató kFt.
4,036
3,975
www.futurealgroup.com
4
buDapEsti ingatlan Hasznosítási és FEjlEsztési nyRt.
3,792
–
–
–
–
–
A
A
–
–
–
–
–
–
www.bif.hu
5
bn ingatlanFEjlEsztő zRt.
2,411
www.biggeorgeproperty.hu
–
–
A
–
–
–
–
–
–
–
Cpi HungaRy kFt. www.cpigroup.hu
6
7
2,248
pRologis HungaRy managEmEnt kFt.
–
–
skanska magyaRoRszág ingatlan kFt.
–
A
–
–
majoR CliEnts in 2019
1,558
–
–
–
–
–
A
–
–
–
–
–
–
Prologis Park BudapestSziget DC8, 2017; Prologis Park Budapest-Harbor DC12, 2019; Prologis Park Budapest-Harbor DC11, 2020
1,509
–
–
–
–
A
–
–
–
–
–
A
A
– Skanska Commercial Development Europe AB (100)
alexandra tomásková – –
1133 Budapest, Váci út 96–98. (1) 382-9100 property@skanska.hu
Bank Center (1995), Pólus City Center, Budapest (1996), WestEnd City Center, Budapest (1999), WestEnd Hilton Budapest City (2000), Nemzeti Színház (2002), Művészetek Palotája (2005), Atrium Mall, Arad, Romania (2008), Arena Centar Zagreb (2010)
A
– Quintana Investments Limited (100)
gyula ágházi Zoltán Lehoczky Ernő Koncz
1062 Budapest, Váci út 3. (1) 374-6500 info@granitpolus.com
www.prologiscee.eu
8
pREviously ComplEtED REFEREnCE pRojECts, yEaR oF ComplEtion
www.skanska.hu
9
gRánit-pólus managEmEnt zRt. www.granitpolus.com
1,175
–
–
–
–
–
–
3
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
majoR CliEnts in 2019
oWnERsHip (%) HungaRian non-HungaRian
top loCal ExECutivE CFo maRkEting DiRECtoR
aDDREss pHonE Email
BudaPart HOMES ’A’,’C’ – 2019, BudaPart HOMES ’B’, ’D’ and BudaPart GATE office building – 2020
A
(60) (40)
Dr. mihály schrancz – Emőke Vaszi
1117 Budapest, Kopaszi gát 5. (1) 241-0100 iroda@ propertymarket.hu
NN, Sanofi, Intrum, Bonduelle, Adecco
– Atenor S.A. (100)
zoltán borbély – Nikolett Püschl
1138 Budapest, Váci út 121–127. (1) 785-5208 info@atenor.hu
assEt managEmEnt
REal EstatE bRokERagE
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
oFFiCE
Company WEbsitE
total nEt REvEnuE in 2019 (HuF mln)
Rank
typEs oF invEstmEnt
pRopERty maRkEt kFt. www.propertymarket.hu 10
1,054
–
–
–
–
–
–
–
–
–
Váci Greens Building A, B, C, D, E and F, Build. E: Sep 2020, Build. F: May 2020, Aréna Business Campus Building A: May 2020
–
–
–
–
–
A
A
– GLP UK Management Ltd. (100)
istván kerekes, natali Cooper – –
1123 Budapest, Alkotás utca 53. (1) 336-2270 info-hu@ goodman.com
A
A A
Robert snow, yovav Carmi Csaba Zovát Imola Boós
1138 Budapest, Népfürdő utca 22. (1) 412-3680 gtchungary@gtc.hu
625
–
–
–
–
–
Aréna Business Campus building B: 2021 Q2, RoseVille: 2021, BakerStreet: 2022
619 (2018)
–
–
–
–
–
A
www.atenor.eu
glp HungaRy
12 managEmEnt kFt. https://hu.goodman.com
–
–
–
–
–
–
341
–
–
–
–
–
A
–
–
–
–
–
–
–
Center Point office building (2003– 2006), Spiral office building (2008), GTC Metro office building (2010), GTC White House office building (2018), Riverside Apartmanház (2004), Riverloft office building and apartment house (2007), Sasad Resort residential park (2008; 2010)
190
–
–
A
–
–
–
–
–
–
–
A
A
– STRABAG Real Estate GmbH (100)
julianna márta – –
1027 Budapest, Ganz utca 16. (1) 345-6400 real-estate-hu@ strabag.com
A
(45) Alan A. Vincent (55)
alan a. vincent – –
1133 Budapest, Árbóc utca 6. (1) 225-0912 cszeley@ convergen-ce.com
gtC magyaRoRszág ingatlanFEjlEsztő zRt. 13
www.gtc.hu
stRabag
14 REal EstatE kFt. www.strabag.com
A
–
–
–
A
–
–
Eiffel Tér Office Building, (2010), City Point 9 Logistics Center (2010), Park One Office Building, Bratislava (2007), CityZen, Office Building (2016), Kálvin Square Office, Building (2016), Árpád Center Office Building (2019), ZenGarden Office Building (2019)
A
Szervita Square Building (2020)
Eiffel Square (2011), Eiffel Palace (2014), Váci1 (2016), Promenade Gardens (2018)
A
Individuals (100) –
attila kovács – Ildikó Rézműves
1052 Budapest, Deák Ferenc utca 5. (1) 473-1209 info@ horizondevelopment.hu
–
–
Bartók Udvar office complex, Tiszaújváros BTS logistics hall, Polgár industrial park, Karcag industrial park, Club Velence residential and holiday park
NAK, Innobyte, Toyota Tsusho, Jabil, Eutaf, Tigra, Multisoft, Multicontact, Inovivo
Székely family (100) –
ádám székely – Emese Horváth
1115 Budapest, Bartók Béla út 105–113. (1) 481-4530 info@infogroup.hu
–
–
–
–
–
Bonarka for Business Building H in Krakow Poland, 2019
Innogy, Aterima, Herbalife, New Work
– Revetas Capital (100)
tomasz lisiecki Bálint Brenner Dániel Jávor
1132 Budapest, Váci út 30. (1) 456-6200 info@trigranit.com
AIG&Partners, Markó Irodák 9 (2018), IP Cain West office building (2009), The Quadrum office building International, M7, Erste, (2008), Haller Kert office DEKA, CGL, building (2008), Market OTP, Central Ferihegy retail park Goldman (2007), M1 Business Park Sachs, (2006), Airport Business Raiffeisen, Park (2004), Alkotás Point AIG, office building (2002), Marathon Infopark A (1999)
– White Star Real Estate LLC (100)
jános gárdai Marietta Biczó Edina Magó
1124 Budapest, Csörsz utca utca 49-51. (1) 382-5100 hu.office-bud@ whitestar-realestate.com
ConvERgEnCE NR
pREviously ComplEtED REFEREnCE pRojECts, yEaR oF ComplEtion
BudaPart, BEM Palace
atEnoR HungaRy kFt. 11
Special Report | 29
www.convergen-ce.com
HoRizon DEvElopmEnt kFt.
www.horizondevelopment.hu NR
A
–
–
Bartók Udvar II phases B and C, Polgár industrial park hall, Karcag Technology and Industrial Park hall, Kecskemét southern industrial park, Kecskemét western industrial park
A
–
–
–
–
–
Millennium Gardens, 2021
inFogRoup
NR managEmEnt kFt. www.infogroup.hu
tRigRanit
NR FEjlEsztési kFt. www.trigranit.com
WHitE staR REal EstatE kFt.
www.whitestar-realestate.com NR
A
–
Eötvös12 Villapark (2023), park22 business park I. (2021 Q4)
–
4
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Socialite The Devilishly Good Story of Hungary’s Leading Energy Drink Whenever I passed a billboard for Hell Energy, I always wondered the same thing: why “Hell”? After I discovered the company is Hungarian, I reached out to ask this very question. The answer from CEO Barnabás Csereklye wasn’t what I expected.
Today, Hell’s distribution ratio in Hungary is more than 90%. This has been achieved partly by building a filling factory here in 2011, improving reliability. Since then, the company has built its own aluminum beverage can factory which produces 100% recyclable cans. In July of this year, the firm announced that it is going to use CIRCAL75 aluminum, the greenest in the world, across its entire portfolio.
Setting Benchmarks
“We are the first and only company in the global beverage sector using CIRCAL75,” Csereklye says. “Now we’re setting a new benchmark for the big multinational brands.” While raising its profile and cementing its credentials as an environmentally aware brand, the energy drink maker is also taking care of business when it comes to doing the groundwork to succeed in other markets.
“We are the first and only company in the global beverage sector using CIRCAL75. Now we’re setting a new benchmark for the big multinational brands.”
DAVID HOLZER
“During the development phase of our first product, we organized tasting sessions with colleagues, friends and relatives,” he explains. “When she tasted the drink, our company cleaning lady said ‘Oh, it’s hellish good.’ In Hungarian, this is ‘Pokolian jó.’ As a good brand name has to be short, expressive and remarkable, we realized that the English version of Pokol – ‘Hell’ – would be perfect.” Hell Energy Magyarország Kft. is currently one of the world’s fastest growing FMCG brands and has far outstripped its origins as a family business founded in 2006. Today it’s in 50 markets around the world and is the market leader in a number of these, including Romania, Bulgaria, Slovakia, Croatia and Greece. As a brand, Hell (stylized as HELL) has always thought big. “The core idea was to develop and produce an energy drink as good as the world leader’s product but for an affordable price,” explains Csereklye. This simple but powerful concept was combined with well-structured distribution and Hell had become market leader in Hungary within four years. Succeeding outside Hungary was always central to the Hell management’s vision. In its first year the company began exporting to Romania. But it really broke through internationally when it began sponsoring what was then the AT&T Williams Formula 1 team
in
2009.
This established the brand’s international reputation and increased global awareness considerably.
Barnabás Csereklye The appointment of Bruce Willis as the face of Hell happened in 2018. He was chosen because Willis embodied the drink’s “dynamic energy, strength and quality.” I was convinced I’d been seeing the Willis billboards for much longer.
Broad Appeal
Choosing Willis as the face of the company also reflects the brand’s broad appeal. Its core consumers are mostly men and women between 18 and 49. This reflects the fact that the first consumers have stayed loyal to the brand. They choose from a varied mix of products that includes extra-strength energy drinks with 20% more caffeine, sugar-free products, active life drinks and milk-coffee drinks. Hell also prides itself on the quality of its ingredients and strict production processes. “We use only granulated sugar and, apart from this and caffeine, our drinks contain five types of vitamin B, carbonic acid or acidity regulators. We don’t add preservatives, but we do pasteurize drinks to extend shelf life,” Csereklye tells me.
How did he respond to suggestions that energy drinks might not be good for our health, that they caused raised blood pressure and other heart problems? “The first and most important thing to say is that energy drinks exist specifically to give energy and stimulate, which is why the two main ingredients are sugar and caffeine. One of our standard 250-milliliter cans contains
80
milligrams
of caffeine, the equivalent of one cup of medium-strong coffee,” he explains. “In 2015, the European Food Safety Panel on Dietetic Products, Nutrition and Allergies was asked to deliver a scientific opinion on the safety of caffeine. It found that single doses of caffeine up to 200 mg do not give rise to safety concerns for a healthy adult. Also, habitual caffeine consumption up to 400 mg, which means consuming five cans of energy drink containing 80 mg of caffeine per day, doesn’t give rise to safety concerns for non-pregnant, healthy adults,” he adds.
“In many countries, Hell is represented by distributors who must meet strict criteria: they must make Hell one of the top three energy drink brands in the country within one year, then the brand must become the market leader in three years,” Csereklye says. “Consumers must be able to buy Hell. It sounds so simple, but it’s our biggest challenge when it comes to building export markets.” And what is the future for Hell Energy? “We’re making sure consumers know how to make Hell drinks part of a healthy diet. We know people are more and more environmentally conscious, as are we. We’ve reduced the greenhouse gases we generate
by
60%.
We’ve also pledged to reduce the amount of plastic bottle packaging in our range from 5% to 1% by 2025,” the CEO says. “In Hungary, we employ more than 1,000 people in a disadvantaged region [it has a factory in Szikszó, 193 km northeast of Budapest, close to Miskolc] and we’re committed to providing stability. We’re known as a socially responsible enterprise. For example, in 2018 we donated HUF 30 million to Miskolc hospital to improve care for children with cancer. We’ve donated a further HUF 20 mln to the hospital when the COVID-19 pandemic started. For us, giving back to our community is every bit as important as succeeding globally,” Csereklye adds.
4
www.bbj.hu
Budapest Business Journal | October 16 – October 29, 2020
Socialite | 31
Wine Events Stagger on but Gems to be Found Fall in Budapest is usually a frenzy of fun wine events with venues vibrating with vinous energy and the buzz of bibulous imbibers. Walkaround wine tastings are as much a test of staying-cumstanding power, as they are of palate prowess, but now there’s also the background fear of coming away with something more than an unpleasant aftertaste, if any taste sensation at all! ROBERT SMYTH
With the intention of being first in, first out before it got busy and risky, I made my way to this year’s edition of Bormedence, which normally pays homage to wines from the Carpathian Basin, mainly (but not exclusively) made by Hungarian or ethnicHungarian winemakers from within and without Hungary’s present-day borders. Bormedence 2020, held at the Magyarság Háza or House of the Hungarians in Duna Palota, District V on October 10, unsurprisingly featured only vintners from within these currently protected borders, with a particular focus on the Mátra and Bükk regions, from northern Hungary. There were more than enough exciting new wines to ensure I ended up among the last out of an enjoyable, if not at all busy event. Recently featured in this column, Bükk is Hungary’s second smallest wine region while, by contrast, Mátra, is Hungary’s second biggest, according to land under vine. Since the large companies dating back to the communist system have dissembled, Mátra has become awash with many miniscule producers who have taken over what is some very fine, often volcanic terroir, in ideally-situated cooler sites that are the place to grow grapes as the planet warms up.
Mátra wine region vineyards. Photo by pixeltaster / Shutterstock.com The organic Páger Pince from Gyöngyöspata has just two hectares of grapes, but it is a case of small is beautiful, judging by the very polished and layered wines, including a zesty but deep Zöldveltelini (Grüner Veltliner) from the 2019 vintage. This was spontaneously fermented and skillfully vinified wholly in new oak, without the wood dominating the wine but being nicely integrated and adding an extra dimension; letting you know it is there, without shielding the fruit. It was also kept on fine lees for 10 months, but not stirred, and bottled with a low amount of sulfur.
Bijou Cellar
One might ask why a white wine like Zöldveltelini would need to go into new oak, but when a bijou cellar buys a new barrel, they’ve got to use it straight away, instead of breaking the barrel in by making bulk wine in it, for example. If a white wine is actually fermented in an oak barrel as well as aged in one, then it can often be less oaky than if it were fermented in stainless steel and only aged in the barrel, due to the wood being more gradually integrated. That is the case here. This wine is currently available at the cellar for HUF 3,800, while it should be available in Budapest in a month or so at the VinoPiano wine bar. A new Mátra winery for me was René’s Wine Heaven. René Juhász is a former center-forward for the Gyönyös soccer team who has struck out into grape growing and winemaking, cultivating seven hectares, six of which are farmed organically. His Bíborkadarka, which is a crossing of Kadarka and Muscat Bouschet created by Pál Kozma and József Tusnádi in 1948, basically as a grape to add color and spice to blends, was an exciting novelty: very aromatic and full of sweet spices, marzipan and dried-fruit Christmas cake-like notes. However, it was a wine from the better known Olaszrizling grape variety that really lit up my palate. High in alcohol at 14%, this spontaneously fermented
and unfiltered wine nevertheless had the body and concentration to carry it, and was pristinely pure, smooth, linear and balanced on the palate. It is remarkable value at HUF 2,500 from the winery, which doesn’t even have a website, but Juhász does deliver wine to Budapest a couple of times a week (email: reneswineheaven@gmail.com). One of the criticisms of Olaszrizling is that the acidity can drop off rapidly when the grapes are left out of the vine in the pursuit of full phenolic ripeness, leaving flabby, uninteresting wines. The last place one might expect complex Olaszrizling to come from would be in the warmer southern climes of Hungary, but Zoltán Horváth of Planina Borház from the Pécs wine region has found an innovative way of packing in acidic punch, by planting different clones of the panCentral European grape.
Acidic Clones
By vinifying grapes from clones of more acidic takes on the grape variety (specifically from Kutyevo in Croatia’s Slavonia region, where the grape is called Graševina, from the SK 54 clone from Fruška Gora in the Syrmia region of Serbia, and the Austrian A3-1 Welschriesling clone) he has succeeded in making a really vibrant Olaszrizling for the 2019 vintage from the now three-year-old vines that are planted together. With lots of thirst-quenching green fruit, lime peel and a nice touch of nuttiness, it is a bargain at HUF 2,290 from Pannonborbolt.hu. Nevertheless, wines from local clones growing in some of Hungary’s complex soils do have the knack of nicely retaining acidity while ripening fully. Another Olaszrizling that really hit the spot at Bormedence was Öregtőkék Olaszrizling 2019 by Balázs Káli, from the Káli Basin in the Balaton-felvidék. It comes from 50-year-old vines from the volcanic basalt soil of Fekete Hill, near Szentbékkálla. It is expected to
be available from Bortársaság soon (for between HUF 2,500-3,000), but for now the 2018 version is still available. Balázs Káli will be one of 70 producers pouring 150 wines at the Grand Tasting of Olaszrizling Október, which will be held at the Corinthia Hotel on October 17, from 2-10 p.m. See you there, early doors of course!