“The significant interest in the I&L asset class, with investors seeking various opportunities such as land acquisition, single assets, large portfolios, and long income sale and leaseback arrangements, have all been observed,” says Dominika Jędrak, director of research and consultancy for CEE at Colliers.

“However, the sector is not immune to economic and geopolitical influences, including higher financing costs, pricing mismatches between buyers and sellers, and limited product availability. Despite these challenges, the I&L sector remains a key focus for investment in the CEE-6 (Poland, Czech Republic, Hungary, Slovakia, Romania and Bulgaria),” she adds.

Colliers puts total I&L stock at 5.1 million sqm in Hungary, with a further 480,000 sqm under construction and a vacancy rate of 7.7%. This compares to a stock of 11.7 million in the Czech Republic, with 1.3 million under construction and a vacancy rate of 1.8%.

Despite economic fluctuations, the overall outlook for the I&L sector in the broader CEE region remains positive, with expectations of continued growth and performance. Capital values per sqm continue to look attractive relative to Western Europe.

Falling Demand?

“Despite variations in vacancy rates among the CEE-13 countries, demand for I&L space has been strong in recent years, driven mainly by sectors such as 3PL [third-party logistics], retail, and distribution. However, a decrease in demand was recorded in most countries in 2023, attributed partly to economic and geopolitical factors,” says Jędrak.

Concerning the increasing role of sustainability issues in the sector, Silviu Pop, director of research at Colliers CEE, sees sustainability initiatives in the CEE-6 region impacting almost 90% of the total stock of modern industrial and logistics space.

“The CEE-6 countries have been implementing green solutions in buildings for a long time, resulting in facilities with the highest levels of environmental certification, such as Breeam or Leed. Progress in ESG implementation varies across the CEE-6 countries, but it is the most developed group of countries among the wider CEE-13 in this respect,” Pop notes.

The labor market in the CEE-13 region, particularly in the production and logistics sectors, sees significant salary disparities among countries, with notable increases observed in the CEE-6 region. This growth is attributed to the nearshoring trend in logistics and the automation of production processes. While the production sector has been experiencing substantial year-on-year expansion, the logistics sector is growing at a more modest pace. The increasing demand for qualified personnel in logistics and production specializations is seen as driving businesses to expand and develop closer to the Central European region.

HelloParks PT2 receives occupancy permit

HelloParks’ PT2 hall in Páty (20 km west of central Budapest by road) has received its occupancy permit, making the company the third-largest industrial real estate developer in the country in less than four years. That is based on the total area of its delivered real estate, which is currently around 310,000 sqm, says HelloParks.

Gebrüder Weiss, the company’s largest tenant, will soon move into the fully let PT2 building with 32,000 sqm of space.

The developer, part of the Futureal group, is currently working on two large-scale projects: construction of the 42,000 sqm BigBox type PT3 has already started at HelloParks Páty and in Alsónémedi (25 km southeast of the center of the capital by road), Hungary’s largest speculative industrial property, the 60,000 sqm BigBox type AN1, will be completed by the end of the summer, meaning that a further 102 million sqm are currently under construction.

CTP Leases More Than 100,000 sqm

The leading industrial developer, owner, and manager CTP has leased more than 100,000 sqm of logistics space to a leading Korean logistics specialist in the automotive industry.

“The company has selected the Breeam ‘Outstanding’ CTPark Budapest West as the location for its distribution center within the park’s building complex of nearly 300,000 sqm of floor space, making it the largest CTPark in Hungary and the sixth largest in the CTPark network, with plans underway to develop an additional 80,000 sqm,” said the developer.

Within Central and Eastern Europe, there are a total of 33 car manufacturing plants, and the region surpassed Germany in nominal car production in 2022. Eurostat data shows that car production in the CEE has increased by almost 50% over the past eight years, reflecting foreign direct investment inflows and illustrating the region’s strength as the leading production location in Europe. CEE, and Hungary especially, is becoming an increasingly strategic location for the automotive industry, says Ferenc Gondi, managing director at CTP Hungary.

CTP says it now has 1 million sqm of I&L space and an additional 240,000 sqm under construction in Hungary.

Faedra Group raises EUR 17 mln

A total of EUR 17 million worth of investment units were subscribed to the Faedra II Real Estate Development Fund, managed by Faedra Fund Management, a part of the real estate group.

“This successful capital raising confirms the trust investors have in Faedra, which is based on competence, delivering previous yield promises, and outstanding yield potential. It also enables Faedra to strengthen its logistics branch, continue successful industrial-logistics development projects from recent years, and exploit identified opportunities in this asset class,” said Bence Boronkay, founder and CEO of Faedra Group.

Faedra is a privately owned Hungarian real estate development group involved in both industrial/logistics and residential projects. It has successfully completed and sold industrial-logistics developments such as the Park in Szigetszentmiklós (23 km south of the capital) and Faedra22 Park, just inside the boundaries of Budapest, which has reached full occupancy.

This article was first published in the Budapest Business Journal print issue of July 26, 2024.