10 minute read
on Commercial Premises
AMENDMENT OF RULES ON COMMERCIAL PREMISES As of March 2, 2019, shop owners have faced new rules regarding work to be carried out within their commercial premises. These ae the result of several amendments to the government decree introducing the so called “function conversion permit” in 2018. Our earlier article in the Budapest Business Journal (October 26, 2018) examined the provisions of the government decree itself, requiring a special permit for function conversion and alteration works in commercial buildings. In this present article, we summarize the new applicable provisions.
Dr. Szilvia Andriska Attorney (H) Noerr and Partners Law Firm
The decree originally defined in which cases it was necessary to conclude the function conversion proceeding. The amendment redefined these cases. As a result of the changes, such proceedings are necessary not only for the conversion of a building with a gross area of at least 400 sqm into commercial function, but also for the conversion of a separate unit with such gross area, located within a building. The procedure should also be applied if the owner or the lessee plans to carry out works within a commercial building, or within a separate commercial unit, with the purpose of increasing the area of such a building or unit to or above 400 sqm and the works are not subject to a building permit. Finally, the procedure also has to be followed regarding alteration works where no building permit is necessary and which are related to the sales area of a commercial building, provided that the size of the sales area is 400 sqm or greater.
Pursuant to the government decree amendment, in the above cases the owner or lessee of the given premises must obtain the assessment of the head of the Government Office of Hajdú-Bihar County. That authority will assess the expected advantages from the remodeling and the possible damages that such works may cause. The assessment will also cover the foreseeable impacts of the building in question on the surrounding area, with special regard to environmental, infrastructural and urban planning aspects. Further, the applicant of such proceedings must be able to outline the measures planned with the purpose of minimizing the related adverse effects and the feasibility thereof. As part of the application, promoting the usage of alternative energy, and supporting sustainable transport solutions might be evaluated positively.
The amendment now also provides for the specification documentation to be submitted together with the application for the permit. Amongst others, precise technical documentation and present and future floor plans of the commercial edifices will have to be added to the documents, based on which the Government Office will assess the application for permit. The current amendments also apply to permit applications already in progress. It should be remembered that the above cases concern basically those matters when the construction works themselves do not require a building permit. However, this does not mean that no special assessment is necessary from the authority when the works are subject to a building permit. If the construction requires a building permit, the above detailed aspects are indeed duly taken into account during similar proceedings by the competent authorities. What is also important to note is that if anyone plans to open a store selling fast moving consumer goods, the parking spaces prescribed by law together with electric chargers have to be made available in order to obtain the operational permit.
According to the above, special attention has to be paid while opening or carrying out alteration works in commercial premises. If the rules are not followed, the authorities have the possibility to impose a fine.
The information contained in the article is for informational purposes only and should not be considered legal advice, legal statement or interpretation.
Continued from page 18 ► ► ►
investors will purchase a major part of the available products,” said Balázs Czifra, real estate investment director at Diófa Asset Management.
FOREIGN DEMAND Demand from foreign investors is also strong: South Africa’s NEPI Rockcastle has purchased the 44,000 sqm Mammut Shopping Center from Lone Star, the second purchase of a leading Budapest mall by the investor. Another retail transaction was the purchase of MOM Park by OTP Real Estate Fund. These deals are seen as a commitment by investors to established and strategically located shopping centers.
The number of transactions in the office market is expected to rise; however, this will mainly be for smaller lot sizes with a value of around EUR 50 million.
“We expect both the office and industrial breakdowns to be relatively similar to last year, with the notable changes coming from the retail and hotel sectors. Over the last few years
at least one or two of the major, prime shopping centers have traded, but we do not expect this trend to continue into 2019,” explains Ben Barclay, senior investment consultant at CBRE Hungary.
“This reduction in retail volumes will be offset by the increasing volumes of hotel transactions, as we continue to see more international, core capital targeting the hotel sector. The lot sizes can affect liquidity: offices at sub-EUR 50 mln are very liquid, whilst platform deals in excess of EUR 100 mln also attract a lot of investor attention. However, there is a thinning within the investor pool for those assets in the region of EUR 60 mln-80 mln, as only a handful of local players have the equity and it does not provide
sufficient scale for certain international investors,” Barclay adds.
This shortage of investment grade product is not deterring international investors from visiting Hungary, although the market has become more competitive in the view of many consultants.
“It [the shortage] has made it more difficult for those already present to increase their exposure, whilst those who are yet to enter have struggled to react in time when a suitable product does become available due to fierce competition from local investors,” Barclay notes.
“I have heard investors imply that the recent dominance of local capital is evidence of an emerging ‘closed-shop’,
Ask for the Budapest Business Journal’s daily English-language premium newsletters
NOW
and get the latest news about Hungary, the region and the energy industry direct to your email intray early each work morning
Ask for a ten-day trial!
but in my opinion this is usually ‘sour grapes’ from investors who have been out bid or left behind by a resurgent market,” says Edwards of Cushman & Wakefield Hungary.
“Local capital has provided a welcome boost to the liquidity of the investment market, but clearly core international funds are now competing for the best stock. We are in a healthy, competitive position and I expect activity from domestic investors to slow down later this year, but they will remain players and international investors will pick up the slack,” he continues.
OFFICE TO GROW? Typically, the office sector constitutes around 50% of the total investment volume, but this is likely to increase this year as the larger, prime shopping center schemes have transacted in
MOM Park.
recent years and imminent retrades are not expected, according to Edwards.
Vécsey, of Colliers International Hungary, believes retail will constitute around 40% of investment volume for 2019, with office likely to dominate the market. The hotel sector is expected to constitute a higher share than in previous years.
Barclay at CBRE points out that transactions are ongoing in the hotel sector, and there are a further four or five that could be on the market. Another possible investment target is residential with the acquisition of large complexes on the Germany model.
Office yields are estimated at 5.75%, although this is regarded as being under pressure and at least ten assets could test this figure if they became available in the view of O’Sullivan. The 7.5% yield for industrial could also be tested if the right opportunities become available on the market. Yields for prime retail assets are put at 5.5%, although, as outlined above, the leading shopping centers are not expected to trade. In general a 100-150 basis point differential is estimated between Hungary and the other core Central European markets.
Czech Republic is experiencing the most aggressive pricing in the CEE region.
“Prime buildings in Prague are now trading close to 4% so even if Roosevelt 7/8 gets close to 5% we will still carry a spread of 100 basis points or more,” says Perez-Ellischewitz.
YIELD COMPRESSION Colliers estimates that prime office and retail yields will compress to 5.25%, high street retail could fall to 5% and logistics yields to 7%.
Hungary and Romania are the two countries in the Central European region where there is room for more yield compression, in contrast to Czech Republic and Poland. Yields for Hungary are much higher than the risk; therefore, there is the possibility that further interest here will fuel further yield compression, according to Péter Számely, head of CEE & SEE at Hypo Noe Gruppe Bank.
“There is a real mix of investors, the German funds are strongly back and Far East capital is actively seeking opportunities and the global financial institutions remain
active. We have already witnessed transactions at or near 5% and I would not be surprised if this is beaten for special or unique products,” argues Edwards.
“People quickly forget that the property downturn that followed the financial crisis was not just a factor of economics or politics, as we had a very limited investor pool and a massive oversupply of offices, our dominant sector,” he points out. “Subsequently, we had years of undersupply, resulting in the current very low vacancy. I would argue that the real estate fundamentals of Hungary are the strongest in the region. On the investor front, we have a more diverse investor pool and an active domestic market, which will assist our recovery in the event of a downturn. Of course a global downturn will have impacts, but we are in a good place to recover,” Edwards concludes.
ADVERTISEMENT
PROPERTY SALE AND RENT
We offer for sale a total 151,006 sqm site in Budapest near to the Campona Shopping and Entertainment Center in the heart of District XXII, close to the bank of the Danube on the Buda side of the city. The property is 18 kilometers from the city center. This part of the district is traditionally an industrial and manufacturing area, and the surrounding land use reflects this. All opportunities are open for development except polluting production activities (e.g.: recreation, residential, warehousing, logistics, retail-wholesale, etc.) The property has office buildings and factory space. It is a revenue producing property, the site of which is free and clean of all debt obligation, and also of all contamination issues. The property provides excellent road access from a logistics perspective, and also benefits
from convenient access to the M0 orbital motorway, which in turn provides access to all other motorways in Hungary. Public transport is available in the neighborhood.
New permanent zoning relations have been established and all interested parties can consult our website to see these.
Owner financing is available. All offers received will be reviewed and responded to. Presently we also looking to rent out parts of the area. Currently we can offer a 2,900 sqm warehouse with 420 sqm of office availability; on the ground floor there is 2,300 sqm of warehousing possibility, with 1,200 sqm of free space upstairs. Also for rent is a three-story building of 3000 sqm, which has to be renovated but would be suitable for an office or hostel.
The location of property
Green areas are also available for rent in 20,000-30,000 sqm that are suitable for the storage of cars, stock or other goods including heavy equipment, miscellaneous materials etc. The site is guarded; fully serviced with gas, water, electricity, and internal road network. We can offer a very competitive rental rates with mixed opportunities in rental period. We are prepared to make modifications where necessary.
If you are interested, please contact Judit Debreceni at ginacakft@gmail.com Phone +36/70-679-7989 or +36/1-424-6200. Please also visit our website: www.ginaca.hu
Ginaca Ingatlankezelő and Hasznosító Kft. 1222 Budapest, Háros u. 7.
