Industrial and Logistics Development Continues to Boom

Established regional industrial developers and park operators such as CTP, Prologis, and VGP are active in the market alongside national players such as the National Industrial Park Operator and Developer (NIPÜF) and Wing. They have been joined by HelloParks (part of the Futureal Group), ConvergenCE and, most recently, the leading regional developer and operator, Panattoni.

Cushman & Wakefield have traced a pipeline for the second half of the year at around 365,000 sqm of industrial and logistics space for Hungary. If this level of delivery is achieved, the new supply for 2022 could surpass the 2021 record levels.

Vacancy rates remain low despite an increase to about 6.5% in the Greater Budapest area and 5.5% in the countryside. Recent completions include a 22,000 sqm facility by CTP at Üllő in the Budapest area, a 45,000 sqm complex for HNTS at Hello Parks Budapest North, and 23,000 sqm for Fiege at the GLP Sziget Logistics Center.

Concerning demand, the prelease ratio is high and, along with built-to-suit, this is the most popular development mode. The tendency is for developers to add a 50% element to a project as the development period is short and demand is high, according to Gábor Borbély, head of research and business development at CBRE Hungary. 

Colliers puts the total delivery pipeline for 2022 across Hungary at 540,000 sqm, with another 277,000 sqm planned thus far for 2023. A developer-led industrial market is now emerging in secondary cities beyond Budapest, as has long been the model in the Czech Republic, Poland, Romania and Slovakia. As a result, consultancies now follow growth patterns in both the greater Budapest area and other Hungarian hubs.

Total modern industrial stock in Hungary stands at 4.3 million sqm, 1.3 million sqm of which is located outside the capital, according to Cushman & Wakefield. Despite this and the strong pipeline, it is still a relatively small stock by Central European standards.

Owner-operators

The regional park developers and operators CTP and Prologis are Hungary’s two biggest owners of industrial stock. With the new Prologis Sziget II development, Prologis has a pipeline of 50,000 sqm of space in Hungary for the year.

With Hungary seen as lacking a solid secondary industrial market up to now, Prologis has been concentrating its development strategy in the M0 area around Greater Budapest. The firm is developing around 80% of space on a built-to-suit basis, with the remaining 20% speculative.

“Over the past year, speculative space has let very quickly, with the very limited supply of industrial space on the market. In general, projects have a delivery time of 10-12 months from permitting to completion,” says Zsuzsanna Hunyadi, director of leasing and customer experience at Prologis Hungary.

The first two warehouses developed by HelloParks, the relatively newly established industrial developer that is part of the Futureal Group, are now 100% occupied after a period of just a few months, according to the builder.

The Maglód and Fót developments in the Greater Budapest area, which opened earlier this year, are the first industrial buildings in Hungary to achieve Breeam “Excellent” certification in the “New Construction” category. In addition to Maglód and Fót, a 58,000 sqm megapark in Páty is also being developed.

The company, established almost two years ago, plans to deliver two further projects in 2022. As a result, the total gross leasable area offered by its portfolio will increase to 160,000 sqm by the end of the year, representing a total investment of EUR 190 million according to company plans.

Largest Project

“The nearly EUR 70 million Páty investment will be the largest contiguous warehouse in Budapest’s agglomeration,” says Rudolf Nemes, CEO of HelloParks. It is also the industrial real estate developer’s largest project to date.

“The Big Box type, energy efficient and environmentally friendly warehouse is expected to be handed over in the summer of 2023. The facility is developed in accordance with the sustainability requirement of the ‘Outstanding’ certificate in the Breeam ‘New Construction’ category. The fulfillment of the strictest sustainability criteria fits HelloParks’ ambitions and its ESG objectives to become a significant industry player in creating a carbon-neutral Europe,” Nemes adds.

Sustainability accreditation is increasingly the norm for the industrial sector: Prologis is aiming for at least the Breeam “Very Good” level across its Central European portfolio. Likewise, CTP is seeking Breeam In-Use “Excellent” certification for its whole portfolio.

The leading European industrial park operator and developer Panattoni, which had been a notable absence in the Hungarian market in recent years, has secured two 100,000 sqm sites in the Budapest area. The company has already undertaken construction of its first 17,300 sqm warehouse at Törökbálint, where Panattoni Park Budapest City West is due to complete in the first quarter of 2023.

Given the low supply of assets, the industrial sector is attracting new investors. In a recent logistics transaction, the developer and investor Wing has purchased the Airport City Logistics Park from CPI, located in the neighborhood of Budapest Liszt Ferenc International Airport. The business park contains almost 44,000 sqm of warehouse buildings and buildings and 8,000 sqm of offices in six already functioning buildings, with one other under construction.

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