Recovery in the Budapest Office Market What 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 Market What is driving lease renewals? Hungary’s Perception Conclusion

3 m2m2 Budapest: Office Completions and Supply Pipeline 5 Year Take-up Average Take-up Forecast Development pipeline has decreased considerably reflecting more realistic levels Demand 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 Lease renegotiations become increasing share of the take-up - Sub-leases may become more frequent

5 Take Up- 30.0% 2009 Overview 2009 forecasts compared to 2008 Effective rents- 10.0% Vacancy rate+ 33% Supply+ 13.0%

6 m2m2 Structure of Take-up in the Last 5 Years Source: Jones Lang LaSalle Research, Year Demand Average

7 m2m2 Source: Jones Lang LaSalle Research, 2009 Structure of Take-up in the Last 5 Years Without lease renewals 5 Year Demand 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 CONFIDENCE RECOVER?

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

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