- As far as I know, you have started your career in Scotland, which is a quite promising market full of opportunities. Why did you decide to change for Hungary?
- Getting my first job just after University at a Scottish firm called Ryden in Edinburgh, Scotland was certainly a pretty important first step into the industry. Thereafter when working as an office Agent for C&W in Edinburgh, 2006 I passed my Assessment of Professional Competence (MRICS) with RICS, which was a real boost to my professional confidence. One of the most important decisions I made was to move across to Hungary in August 2008, as this has had an enormous impact on my professional and personal life. It was probably the best decision I have ever made. A notable promotion was making Partner at C&W when I was running the Office Agency team in Hungary. But obviously, save the best for last, being offered and accepting my current role at CBRE where I manage and oversee the Advisory & Transaction Service lines (encompassing Office, Retail & Industrial Agency teams). I am relishing this new role and really enjoying the challenges and successes it will entail.
- How would you evaluate the local property business just now? Some expert say that this boom will last till 2019, then comes depression again. Do you agree with that?
- There is no doubt that in Hungary we are enjoying a very healthy level of activity on both the occupier and investors side, defined as a buoyant market. Budapest has continuously improved its attractiveness as a business destination and based on most recent ranking it is the most liveable city in Central Europe. This is reflected in the high number of new companies setting up business or expanding their services in Budapest – contributing to the high office demand we are seeing these days. I am no economist, but with markets being cyclical in nature, it is likely there will be some sort of recalibration in a couple of years, although it is difficult to say when. Right now we do not see major warning signs to point into the direction of a radical slowdown or recession - as it was the case in late 2008.
- What success can CBRE point to from this year, and what are your plans for the next few months?
- CBRE is certainly on the up in Hungary, but we need to really make sure the brand is recognised across the country not only by property professionals, but by non-property based people as well. If we can achieve this, then a lot of the marketing and profile enhancement will be done by non-CBRE parties, which would be terrific. It takes a long time to create a strong reputation, and only a second to lose it, meaning we need to offer our clients a consistently professional service at every turn and on every mandate.
From an Advisory & Transaction perspective, CBRE has recently won / transacted several large mandates / mandates (i.e. Campona and Polus shopping centers (Retail), Buda Palota (Offices), Millennium Gardens (Offices) etc.), so the momentum is certainly on our side. The objective is to use the current momentum to keep driving the business forward, and continue to provide our clients with the most professional service, thereby securing new work from new clients and repeat work from existing clients, which we are hungry to achieve.
- How long do you think lease fees can continue to rise? Do they really rise? And what about vacancy rate?
- If we are referring to Office rents, then there is a clear split between the market – available Grade A, available Grade B and the committed development pipeline. Using the Grade A existing office market, my feeling is that in the rest of 2017 headline rents will continue to rise, until new supply enters the from early 2018 onwards. This will dilute the demand slightly, but if occupier activity continues as it is, it will only temper it slightly and not shift the market to a tenant favourable solution. We must remember much of this new committed space is already pre-leased. In addition to this headline rent growth, I expect incentives to continue to shorten with less rent free and lower Fit-Out contributions being offered to tenants.
The Development pipeline is different. There are several key Developers around the city, who are very keen to start their projects with a nice juicy pre-lease in place from a large tenant. The reality is that given the over-supply of these new schemes, and the lack of large tenants (i.e. 10,000 s qm +) with a lease expiry in 2020 onwards. After negotiations this means the commercial terms secured are far more competitive for the tenant, as the developers look to provide wider incentives and lower headline rents, quid pro quo no void, less risk and perhaps, some could argue, an eye on yield compression relating to any future divestment.
- It seems the market really appreciates the boldness of speculative developers again. Is this a good sign?
- There has certainly been a resurgence of new build schemes across the city, which is a reaction to the robust occupier activity and credit to Budapest as a popular and respected destination for occupiers. Given the time lag in developments versus any market cycle some may think that we could be facing a repeat of oversupply. In my opinion, given that circa 50% of this supply is pre-leased, and the robust appetite for occupiers I am confident the market will be able to absorb much of this new quality space and am not concerned by this when compared with the massive oversupply we experienced in 2009 / 2010.
- Are you affected by the blue-collar worker shortage in Hungary? (e.g. cost raising) –To be honest, there is a white collar worker shortage too; construction works are affected by the lack of them.
- Given the fact we have a historically low unemployment rate in Hungary clearly this is a concern for employers across all sectors, and the country could be a victim of its own success in terms as the market only has a finite amount of people to pick talent from. However, this is where the quality of the building and the job opportunity itself are of significant importance for companies in managing to recruit, and most importantly, retain their staff for the long-term. The quality, efficiency and location of the office will play a really critical role for companies when looking to gain a competitive advantage above competitors. I have also seen new market entries to the city adapt to this challenge in very creative ways, one example being BlackRock who hosted events in London for Hungarian ex-pats who would be keen on returning to Budapest, which I understand was a real success.
- What countries (cities) are the most important competitors for Budapest/Hungary in the region? What is their advantage, if there is any?
- Regionally speaking we are always competing against Czech, Poland and Romania. Due to the size and geography of the country, it is hard to compete with the likes of Poland, who have more regional cities which offer can offer similar strong market fundamentals for companies when they are choosing their geography. That being said, I am happy to see the CEE as a location in general becoming a global player in the SSC / BPO market, which is testament to the quality of human capital, infrastructure and market fundamentals (to include quality real estate options). Although we are enjoying a period of growth across EMEA and CEE, if there was a steep downturn, one could argue that the CEE could weather the storm better than the Western countries who would lean-up their operations and look to re-populate back office functions to locations such as CEE and Budapest. The Hungarian Capital has a diverse economy which is likely to weather the storm better than a city with a single economic profile.