The market is continuing to grow despite concerns over perceptions that demand may be moderating, encouraging developers to move towards a more cautious built-to-suit development model rather than a more ambitious speculative (“build it andthey will come”) approach.
There is currently more than 5.1 million sqm of modern logistics and light industrial space in Hungary, with over 3.5 million sqm of this in the Greater Budapest area, according to the Budapest Research Forum (consisting of CBRE, Colliers, Cushman & Wakefield, Eston International, iO Partners and Robertson Hungary).
Vacancy has risen to more than 8% in Hungary, but is still below the 10% CEE regional vacancy threshold. Cushman & Wakefield has traced 484,000 sqm of industrial space due to be delivered this year. CBRE sees vacancy in Greater Budapest and regional Hungary as meeting at around 8.5%.
The amount of industrial stock in Hungary is still relatively small compared to the major Central European players of Poland and the Czech Republic and, increasingly, the rapidly growing Romania market.
However, a regional cross-country logistics and light industrial network has finally emerged, as has long been the model in other CEE markets. Developers are also meeting more complex tenant demands. These, alongside increasingly stringent EU Taxonomy regulations, mean developers are delivering increasingly ESG-compliant logistics and light industrial facilities.
The industrial pipeline for Hungary currently stands at 460,000 sqm, a large proportion of which is preleased, according to Colliers. The largest projects are a 118,000 sqm warehouse at CTPark Szigetszentmiklós (20 km south of central Budapest by road), a 56,000 sqm manufacturing facility by Weerts at its Vecsés Airport park, and a 45,000 sqm facility at HelloPark Maglód Budapest Airport.
The industrial market has attracted specialist international industrial developers and park operators in addition to established Hungarian developers, moving into what has become an attractive market. The leading developers with regard to supply are currently, HelloParks (a relative newcomer and part of the Hungarian Futureal Group) and the prolific CEE industrial developer CTP. Wing, an established Hungary and CEE developer and investor, has ongoing industrial projects in the Budapest area.
Outside of the capital, CTP, for example, has a project in Komáron (93 km northwest of Budapest), the Belgium VGP has developments in Kecskemét (87 km southeast) and Győr (120 km west) and the leading European industrial developer, Panattoni, has a development project in Debrecen (230 km east). The VGP and Panattoni projects are based on preleases.
The Hungarian Infogroup, which in September changed its name to Innovinia, is developing its IGParks network in regional industrial hubs. This also reflects a shift towards regional cities by developers in response to incoming investment.
“It is clear that the needs of a production assembler are completely different from those of a logistics service provider. Their utility needs are very specific, which can be a particular challenge in the market, as it can be very time-consuming to acquire and build the required capacity,” comments Zsuzsanna Hunyadi, director of leasing and customer experience at Prologis Hungary.
“At Prologis, we have been working with production and manufacturing companies for more than 10 years, with 40% of our portfolio containing manufacturing-assembly customers, so our experience allows us to respond quickly and with great expertise to such requests. Our Prologis Park Budapest-Sziget II park can fully and immediately meet large capacity requirements,” she adds.
Sustainability accreditation is becoming the norm in the upper strata of the industrial sector with developers and park operators such as Prologis, CTP, Panattoni and HelloParks all developing more highly specified Breeam and Leed accredited complexes.
“The real estate sector is the biggest energy consumer in the EU; hence, it carries a significant responsibility to fulfill climate neutrality criteria,” notes Anna Bencze, head of sustainability at HelloParks.
“Such an achievement calls for a substantial reform of current practices, which we perceived as a promising opportunity from the beginning. The industry must anticipate forthcoming scenarios that would satisfy the interests of the environment, local communities and businesses alike. Our explicit goal is to motivate the entire industry through our ambitious targets,” she adds.
HelloParks Maglód Megapark was the first industrial property in Hungary to achieve the Breeam New Construction “Excellent” ranking, while MG3, completed in the second phase, was the first to achieve an “Outstanding” rating. Among its energy efficiency features are roof-mounted solar panels, which allow the offices to operate with zero primary energy consumption. Rain is also harnessed and collected in a separate storage tank for irrigation.
“ESG demands and the EU Taxonomy are significantly influencing the logistics real estate market in Hungary. These factors are driving a shift towards more sustainable and environmentally friendly practices within the industry,” says Hunyadi of Prologis.
“There is an increased demand for sustainable buildings; customers and regulatory bodies are more and more prioritizing sustainable logistics facilities. At this moment, this demand is especially strong with larger international companies,” she notes.
“As ESG also encompasses social factors, at Prologis, we are committed to focusing on the well-being of our customers. We created ParkLife spaces to improve the local quality of life and help our customers attract and retain workers. These include green spaces, sports and fitness facilities, job training centers and recreational and community engagement spaces as an added value,” Hunyadi concludes.
This article was first published in the Budapest Business Journal print issue of October 18, 2024.
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