Refurbishments and Mixed-use Dominate Retail Market

Retail

The Allee shopping center in Budapest, refurbished at a cost of EUR 18 million.

The last edition to the Budapest shopping center market was the 55,000 sqm Etele Plaza by the Hungarian developer Futureal, which opened a year ago. Before that, there had not been a delivery to the market in several years.

“The three major forms of retail development are as part of mixed-use projects, regional retail centers and refurbishments of existing shopping centers,” comments Gábor Borbély, director of research and business development at CBRE Hungary.

No other centers are planned in the immediate future in Budapest, meaning renovation of existing malls is currently the central element of shopping center development in Budapest. Owners are striving to update their assets to meet modern demands from consumers, emphasizing rebranding, redesigning and upgrading the tenant mix. More sustainable elements are also being added.

In the latest such refurbishment, the retail asset manager Multi Corporation, acting as center manager and designer, has completed the EUR 18 million refurbishment of the Allee Shopping Center by what it says is enhancing the “interior and exterior design and investment in sustainability to pave the way to carbon neutrality.”

The complex has received Breeam “Outstanding” accreditation following the renovation. Allee is owned by Allianz Real Estate and an investor represented by CBRE Investment Management, who started the refurbishment works in 2020. As part of the work, the food court has been extended with more restaurants and cafés added. 

“The renovation has been transformational, and Multi Corporation did a great job creating an enjoyable experience for customers while at the same time improving energy efficiency and reducing carbon emissions in the shopping center,” commented Philippe Brand, senior portfolio manager at CBRE Investment Management.

Allee is in District XI, located close to Etele Plaza, and the two centers could be seen as being in direct competition as they are a short tram ride or drive apart.

Complete Restructuring

Wing has undertaken what it describes as a complete restructuring of its EuroCenter in Óbuda, now rebranded as the GoBuda Mall. According to the developer, the 25,000 sqm center now offers 100 stores and a service function. The interior and exterior have been completely renovated and a green roof has been added. A 140-meter passage has been developed to house fashion outlets. The company emphasizes the natural light penetrating the center through modernized roof windows.

Another established developer, CPI Hungary, has refurbished the 40,000 sqm older generation Campona shopping center on the outskirts of Budapest, adding new tenants and putting entertainment at the center of the retail experience, as it describes it. Another project will see the 40,000 sqm Atana complex in Budaörs renovated by 2023.

Outside of Budapest, another component of retail development can be found in retail parks with a hypermarket or a significant food element. In a major recent investment transaction, Adventum acquired 273,000 sqm of space in 18 properties anchored by Tesco stores across Hungary and the Czech Republic.

There is currently around 2.7 million sqm of retail park space in Hungary, with a pipeline of a further 72,000 sqm, according to Cushman & Wakefield.

Immofinanz has a portfolio of 14 retail parks in Hungary under its Stop Shop brand name, three of which are located in Budapest. “We aim to create neighborhood centers with a catchment area of 30,000-150,000 sqm,” says the developer and property manager.  

One further development possibility is for street-front retail as part of mixed-use or office complexes. The Szervita Square Building in the historical center of Budapest has a high retail element. The centrally located Emerald Residence by Biggeorge has a retail component in addition to residential units and a boutique hotel.

Budapest’s high street retail totals 78,000 sqm with a 3,000 sqm pipeline, according to Cushman & Wakefield. The BudaPart mixed-use complex, creating a new quarter on the banks of the Danube, includes a significant street-level retail and service element alongside office, residential and leisure elements.

Breath of Fresh Air

Given all of this, there is little wonder that analysts saw the EUR 300 mln Etele Plaza as a welcome freshening of the Budapest shopping center market back in 2021. The indications are that despite the rise of e-commerce (online penetration is expected to rise to 14% of retail activity according to Euromonitor), Hungarians in large part still prefer the experience of shopping in a physical environment if the project meets their needs in terms of design and amenities. 

The Etele complex includes around 180 retail, entertainment, and service outlets, including restaurants, cafés, a multiplex cinema, a gym, and 1,300 parking spaces. It is located at a transport hub at the meeting point of Kelenföld Railway Station, Metro line 4, and the approach section of the M1 and M7 motorways.

The development is certified “Very Good” by Breeam, and Futureal is hoping for Well accreditation, although there is currently no provision for shopping centers in the organization. The complex is part of a mixed-use development on a brownfield site with easy access from residential areas, similar to the Corvin Promenade development elsewhere in Budapest, also by Futureal.

Cushman & Wakefield puts the total modern shopping center stock in Budapest at around 820,000 sqm, which is low by European standards. The consultancy has further traced a grand total of 1.3 million sqm of mall space across the whole of Hungary.

The leading Budapest centers are generally considered to be the Allee (47,000 sqm), Arena Plaza (66,000 sqm), Árkád center (68,000 sqm), Mammut (58,000 sqm), MOM center (30,000 sqm), and Westend (45,000 sqm).

Many of these have changed hands since completion, and center owners are planning or have undertaken renovations of what are often earlier-generation centers ill-equipped to meet the requirements of shopping malls in a post-pandemic environment. A need to better address today’s shopper needs is only brought into sharper focus by the emergence of online retail as a rival to bricks and mortar outlets.

This article was first published in the Budapest Business Journal print issue of October 21, 2022.

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