Leading Hungarian and regional logistic park developer and operator Prologis has acquired a 13-hectare development site adjacent to its fully developed and leased Prologis Park Budapest-Sziget. Based on the M0 Budapest ring road, plots have become increasingly difficult to source at this major Budapest logistics hub.
The deal was facilitated by Modesta Real Estate; the location has all the necessary permits and potential for two logistics facilities totaling 60,000 sqm according to Prologis.
Although the logistics and light industrial sector has been hit by the coronavirus as with other market sectors, it is seen by many analysts as being the development and investment sector in the most favorable position for the post-COVID period.
The respective Central European governments have now reopened the borders to and from Austria, Croatia, the Czech Republic, Hungary, and Slovakia, enabling logistics traffic to run smoothly in the region. At the same time low vacancy rates are forecast to continue due to high demand.
“Decision making processes have clearly slowed. Tenants are prioritizing their efforts and are mostly focusing on getting back their businesses to normal,” comments global commercial real estate firm Cushman & Wakefield in its latest market update.
“This means location searches, lease negotiations, contract negotiations etc. are slower than pre-COVID. Large-scale transactions have occurred over the past weeks and months despite the pandemic, depicting healthy demand and positive market sentiment,” it adds.
The consultancy expects a record low vacancy rate as of summer thanks to the combination of continuing high demand and a very limited handover of new facilities. Hungary has had the lowest vacancy rate in the Central European region at 2.8%, a historic low in a market that is concentrated in the greater Budapest area with total stock estimated at 2.3 million sqm.
Few existing logistics schemes have 5,000 sqm plus spaces available according to the Budapest Research Forum (BRF), which consisting of CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary.
Prologis has an occupancy rate of more than 99% in Hungary, compared to 95% in its Central European portfolio, according to the company.
“Projects already started pre-COVID are expected to be handed over with a quarter’s delay,” Cushman & Wakefield explains. “Developers are strongly focusing on BTS [built-to-suit] or semi-speculative opportunities with the price of BTS continuing to be 10% over the price of existing schemes. The appearance of a new player (still unnamed) should have a positive effect on market liquidity and land transactions,” the consultancy adds.
The logistics provider Fiege Group has signed leases for a total of 38,000 sqm of space at Prologis Park Budapest-Harbor, bringing the total of space leased at the complex to 59,000 sqm. It also provides Prologis with its largest tenant in Hungary.
Regional industrial developers and park operators are developing sustainability accredited and more highly specified projects in reaction to changing tenant demands.
Prologis, for example, says it has achieved a reduction of 30% in heating costs, while LED lighting and large skylights cut electricity consumption by 45%. The complex provides electric car charging facilities and direct public transport links.
Prologis says it is now committed to developing sustainability-accredited space across Hungary and the region, and has six BREEAM accredited buildings at Prologis Park Budapest-Harbor and Prologis Park Budapest-Sziget.