Recovery in the Budapest Office MarketWhat will change?drive

2

Agenda

Supply and Demand in Budapest:Office completions and pipeline

An Occupier’s Perspective:What is driving occupier demand?

Overview of the Office MarketWhat is driving lease renewals?

Hungary’s PerceptionConclusion

3

m2

98,6

00 226,

738

248,

979

255,

754

100,

000

96,4

00 193,

100

140,

000

0

100,000

200,000

300,000

400,000

500,000

600,000

2004 2005 2006 2007 2008 2009 2010 2011

Completions Future completions Pre-Crisis Forecast (Q2 2008)

Budapest: Office Completions and Supply Pipeline

5 YearTake-up Average

Take-up Forecast

Development pipeline has decreased considerably reflecting more realistic levelsDemand is expected to grow gradually from 2010

4

How the Crisis Changed Occupier Demand?

• Today- Tenant property need driven by cost reduction and space optimisation- Using lease breaks & expiries as tools for renegotiating rents- Declining net take-up

• Tomorrow- Oversupply but limited new supply in 2010- Lease renegotiations become increasing share of the take-up- Sub-leases may become more frequent

5

Take Up - 30.0%

2009 Overview2009 forecasts compared to 2008

Effective rents - 10.0%

Vacancy rate + 33%

Supply + 13.0%

6

m2

Structure of Take-up in the Last 5 Years

Source: Jones Lang LaSalle Research , 2009

050 000

100 000150 000200 000250 000300 000350 000400 000

2004 2005 2006 2007 2008 YTD 2009

New Expansion Pre-lease Renewal

5 YearDemand Average

7

m2

Source: Jones Lang LaSalle Research , 2009

050 000

100 000150 000200 000250 000300 000350 000400 000

2004 2005 2006 2007 2008 YTD 2009

New Expansion Pre-lease

Structure of Take-up in the Last 5 Years Without lease renewals

5 YearDemand Average

8

What is driving the renewals?

Limited cap ex for

relocation

Landlords must retain

tenant to cpver interest

payments

Lack of business

confidence

Economic decline

FDs looking for easy

wins

Downsizing not growth

Weakened real estate

market

WHEN WILL CONFIDENCERECOVER?

9

What Will Break the Cycle?

Perception&

Confidence

10

Key Messages for Today

• Tenants are taking a defensive strategy, keeping net take-up volumes low

• Supply is increasing, putting a downward pressure on rents

• Occupiers in winning position

• Oversupply will need two years to be absorbed

Better perception of Hungary is the key to recovery

Thank you!

COPYRIGHT © JONES LANG LASALLE IP, INC. 2009