Shopping Center Redevelopment the Norm
Hungary is recording positive retail indicators, with sales increasing by 5% year-on-year in August, according to the Central Statistical Office (KSH). However, shopping development has been very low in recent years, with only one shopping center currently under construction in Budapest, although several older malls are undergoing refurbishments.
Etele Plaza by Futureal.
“It is a general trend on the Hungarian retail market that the older shopping centers are now under repositioning and concept change,” comments Viktória Szabó, head of retail agency at Cushman & Wakefield Hungary.
“Part of the reason is the fact that a large number of centers are truly outdated, not only from a tenant mix perspective, but also from an appearance and design point of view. A typical example for the most recent modernization is Shopmark (formerly Europark), which was one of the first centers on the Budapest market,” Szabó points out.
“Allee shopping center is also planning major changes, which is timely not only due to the upcoming opening of Etele Plaza, but also, since the center is celebrating its 10th anniversary this year. The plan of the owner is to upgrade the mall with new, high class brands, being able to even better serve its immediate catchment area,” she says.
The next shopping center delivery in Budapest will be the 54,000 sqm Etele Plaza by the Hungarian developer Futureal, with a scheduled handover at the end of 2020.
Designed by the Paulinyi & Partners (Hungary) and Dyer Studio Inc. (Portland, Orlando), the complex will include around 180 retail outlets located at the meeting point of the Kelenföld railway station, Metro 4 line and the M1-M7 motorways. Futureal says the site provides access to one of the largest residential areas in Budapest and as a transport hub it is used by an estimated 165,000 passengers daily.
“The differentiation of shopping centers has already started; for example, Allee, which is in Etele’s competition catchment area, has been concentrating on attracting more and more premium category retailers and services, which is reflected by its marketing activities,” says Éva Sréter, head of retail at JLL Hungary.
“Obviously, it has an effect on the refurbishment of other malls. On the other hand, in Budapest there are many first generation shopping centers. As a consequence, revitalization has to be done; their layout is old-fashioned and their technology is outdated,” Sréter adds.
JLL puts total modern shopping center stock in Budapest at 722,000 sqm, which is low by European standards. This represents a total shopping center density of 433 sqm per 1,000 inhabitants, with an average mall size of 30,000 sqm; around a third are more than 60,000 sqm, according to the consultancy.
The leading centers all have waiting lists for tenants and are therefore able to command the highest rents. At the same time, the market has reached a relatively high density level, and therefore refurbishment instead of pure development is becoming more relevant and therefore will become the norm.
“Etele Plaza will be the first major scheme on the Budapest market having a strategic location since 2011, when KÖKI opened,” says Cushman & Wakefield’s Szabó.
“Etele will most likely affect the shopping center market in general, due to its overall size and planned fresh trade mix, which will not only focus on the latest and most popular brands, but will also accommodate new profiles based on changed customer needs, such as a larger food court and restaurant area, more leisure elements, etc.,” she adds.
Another planned mall is the 53,000 sqm Bogdáni shopping center by the German developer ECE, located in the Óbuda area of Budapest at another transport hub. ECE’s 68,000 sqm Árkád center is currently the largest shopping center in Budapest. The complex was completed in 2002 and extended and renovated in 2013, making it the last major shopping center delivery in Budapest.
ECE’s new project has not yet received a green light from the authorities, although the market is certainly ready for the new development. The location of the project is well planned, with no other large-scale malls in the close vicinity according to Szabó.
Central Park, by the Hungarian developer Granit Polus, located in Districts VI and XIII is at the planning stage. The mixed-use development will consist of retail, office and residential elements. Negotiations with the authorities are ongoing for the long-planned development.
Existing centers such as the 66,000 sqm Arena Mall and 58,000 sqm Mammut are expected to be renovated and extended in response to a perceived market need to upgrade malls with a strong focus on the food and beverage and leisure elements.
“The tenant mix of most schemes has always been mixed-use; however, the focus on the F&B sector and unique leisure elements is stronger nowadays,” says Szabó. “Both profiles are logical reactions to the changed retail market environment, such as the strongly growing e-commerce. People may buy more products through the internet, but they will surely leave their homes for good quality food and a unique leisure experience,” she insists.
The South African investor/developer, NEPI Rockcastle, has in recent years acquired the Arena Mall and an adjacent 22-hectare development plot, as well as the Mammut shopping center.
“Refurbishment has provided a differentiation from other houses. The F&B selection should be developed; entertainment components should be introduced/advanced; or another option is to widen the GLA of existing malls due to interest from the retailer side, such as at MoM Park, or on the Aréna plot,” comments Sréter at JLL.
Indotek is one of the most active shopping center owners at present in Hungary, and recently acquired the shopping center portfolio of Kleppierre. With this latest acquisition, Indotek owns 14 large-scale shopping and commercial centers across Hungary, most of which the company plan to revitalize by refreshing their overall trade mix, as well as refurbishing the buildings to a newer standard.
Refurbishment works at the Debrecen, Szeged and Szolnok Plazas are under way, whilst other projects are still in planning phase.
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