Boston, MA -- (SBWIRE) -- 02/17/2014 -- While Hungary's commercial real estate retains one of the worst outlooks for the market regionally, we are optimistic that the market reached its nadir in 2013 and will begin a moderate recovery over 2014. While both demand and investor sentiments remain stunted, we maintain that the sector presents long-term opportunities due, not least, to the country's strong socio-demographic fundamentals. An upturn in Hungary's macroeconomic outlook in 2014 should help to support growth in demand for commercial real estate, brining some much-needed relief to rental rates, which have fallen sharply since the start of the downturn in 2011. The country's exit from the EU's Excessive Deficit Procedure has been a welcome development, however, we do not expect a strong resurgence in economic activity as the government's erratic policy making and high corporate tax rates deter domestic and foreign investment. With the country's economic scenario less than assured, the real estate industry's recovery remains at an extremely fragile stage, and should further economic distress emerge, over the course of 2014, market contraction will be prolonged. The main area of upside is the retail segment which has outperformed both the office and industrial sectors over the course of the industry downturn.

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Recent Developments

- The Budapest Commercial Property Index rose to 90.74 points from a record low of 90.35 points recorded in H113. The index, which aggregates forecasts for rental rates and yields for the country's commercial real estate sector, fell by almost 10% from 2011 levels in H113.
- The Magyar Nemzeti Bank (MNB) has announced plans to extend its subsidised loan programme, the Funding for Growth Scheme, from January 2014 to finance real estate construction.
- In December 2013 Swiss-Hungarian investment firm 'Aranypart' RE Investment Fund purchased the office building belonging to French automaker Renault, located on the R?bert K?roly ringroad in Budapest.

Key BMI Forecasts

- Rental rates for the office sector are forecast to remain unchanged over H213 with rates expected to carry their current levels into 2014.
- Retail rental rates will also maintain their current levels over the second half of the year.
- The price of retail space in Budapest will continue to outperform those for Debrecen and Gyor though the latter is the only city for which we currently project growth in rates in 2014.
- Our forecasts for the industrial real estate segment see rates continuing to drag some way below the office and retail sectors.
- That said, the sector is expected to see some movement in rental rates over H213, with an increase of about 7% forecast for the city of Gyor.

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