Retail Offerings Must Move With the Times
Etele Plaza, Budapest’s newest shopping center.
It hasn’t been an easy few years for retail developers. Concerns over the level of consumer spending in the wake of the financial crisis were followed by stringent planning regulations for shopping center development, and then the impact of COVID, the lockdown, and the rise of online retail.
As a result, there hasn’t been a major shopping center delivery for a decade, although some projects have been planned by leading international retail developers such as Echo Investment.
Given all of this, the opening by the Hungarian retail developer Futureal of the 55,000 sqm, EUR 300 million Etele Plaza mall after several postponements of the project is seen as a milestone in the Budapest shopping center market.
It has been a long gestation period: Futureal acquired the brownfield development site at a railway, metro, tram, and road intersection on the western edge of Budapest 15 years ago.
“Etele Plaza is the latest generation, carefully designed shopping center that meets the current needs of shoppers and visitors. Over the last 10 years, our industry has been talking about entertainment, and the whole shopping experience has to be entertaining from the moment you start from home to the moment you arrive back,” says Tibor Tatár, CEO of Futureal.
It should come as no surprise that the new market entrant improves the age profile of the Budapest shopping center market: It is not just that there have there been no fresh projects in the past 10 years; 63% of the existing malls have not been refurbished over the same period, according to CBRE. Some 22% of the stock has been renewed or built recently (including Etele Plaza), while 15% is up for regeneration.
“I do not see a radical change in supply and demand in the next two years in the retail sector,” comments Erika Garbutt-Pál, head of retail at CBRE Hungary. “Retailers are optimistic and planning stronger expansion from 2022. They are optimizing their portfolios and taking longer to approve new stores, but they are expanding and planning for the future,” she adds.
“There are no major shopping center projects in the pipeline; however, we are working on several [projects] restructuring and repositioning existing malls. The majority of our shopping centers are older than 20 years. They need to renew and follow today’s trends; otherwise, they will lose out with regard to both tenants and customers,” Garbutt-Pál adds.
Cushman & Wakefield put shopping center stock in Budapest at 770,000 sqm before the addition of Etele Plaza, a low supply of retail density by European standards.
Designed by the Hungarian architectural firm Paulinyi & Partners, Etele Plaza includes around 180 retail outlets, restaurants, cafés, multiplex cinema, a gym, and 1,300 parking spaces. The complex is Breeam “Very Good” certified, with Futureal is also looking to achieve WELL certification, although there is currently no accreditation system for shopping centers.
“We did a shopper profile, for example, a young couple with small children living in block housing or a wealthy Buda family with high spending power, to try to understand what is the shopping experience, what entertains them, and what draws their attention from a profile by profile perspective,” explains Tatár.
“All these details were designed into the complex (and this also includes several thousand elements from tenant experience) from a visual and digital experience of how they approach the shopping center by public transportation or by car,” he says.
“By thinking from a profile by profile perspective, we have tried to tick as many boxes as possible, and I think that this has been slightly different to the approach of previous shopping center developers. We even sacrificed income on certain tenants as we needed their function, and they could not afford to pay a high rent,” Tatár adds.
When it comes to the need for shopping center owners to adapt their centers to meet changing tenant needs, Garbutt-Pál argues that shopping center owners need to follow the trends and act quickly.
“We are living in a very fast-changing world where online and offline are both developing. Retailers are trying to change, trying to find the best balance between physical stores and e-commerce. In the future, shopping centers have to provide a pleasant environment, many services, and a combination of pick-up points, flexi-offices, a wide selection of F&B, culture and entertainment. All these are huge investment costs,” she points out.
Several shopping center owners are either considering the renovation of existing centers or actively doing so. CPI Property Group, which operates five malls, is refurbishing the Campona shopping center in South Buda with a proposed reopening date of early 2022. Wing is redeveloping Eurocenter in Buda with a scheduled completion date of spring 2022.
Turning to high street shopping, Horizon Development has completed the retail component of the Szervita Square Building mixed-use office, retail and residential complex. The Emerald Residence hotel, a hotel and retail complex by Biggeorge Property, also located in Szervita tér in the central District V, is due to deliver an up-market retail component.
Another area for development is provincial retail parks with significant grocery content. One example is the EUR 24 mln, 11,000 sqm S-Park Kaposvár, delivered by SES Spar European Shopping Centers to serve Kaposvár (187 km southwest of Budapest by road) and the surrounding region.
Garbutt-Pál sees the future for retail development as part of mixed-use complexes.
“I believe this is the way forward, and the pandemic is further proof that we need more of these mixed-use projects,” she says. “We like to work closer to our home; we would like to do some sport, entertainment, or social activity close to our workplace and carry out all our daily needs, shopping, and services within 10 minutes from where we work and live. These must be all covered in a well-planned mixed-use development.”
This article was first published in the Budapest Business Journal print issue of October 22, 2021.
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