Industrial Records Strong Indicators
Prologis Park Budapest-Harbor.
The industrial market continues to be regarded by analysts as the sector in the most positive position for the post-coronavirus period. The two largest deals in Q4 of last year were a 23,000 sqm letting at CTPark Budapest East and a 16,000 sqm renewal at Prologis Park Budapest-Sziget in Szigetszentmiklós.
These deals reflect the dominance of the two leading Central European industrial park developers and operators in Hungary.
Prologis has completed a land acquisition for the development of 60,000 sqm of space on a 13-hectare site at Prologis Park Budapest-Sziget in Szigetszentmiklós in the south Buda area, 17 km from the center of Budapest and 35 km from Ferenc Liszt International airport.
“Our key focus is on the greater Budapest area,” says Máté Szoboszlay, director of capital deployment at Prologis Hungary.
The developer has 630,000 sqm of industrial space in five parks in the Budapest area with a pipeline of 60,000 sqm. The existing parks are fully let with 98% occupancy. From a demand perspective, take-up for last year stood at 265,000 sqm, 69,000 sqm of which consisted of new lettings.
Total modern industrial stock in the greater Budapest area stands at about 2.4 million sqm as of the end of the year, according to the Budapest Research Forum, consisting of CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary.
Industrial demand remains strong with Hungary having the lowest vacancy rate in the Central European region at an overall 2%. There are few, if any, existing logistics building with more than 5,000 sqm of available contiguous industrial space.
Cushman & Wakefield recorded 540,000 sqm in transactions for 2020, 60% of which was net take-up and therefore is new leases. Of the 2% vacant space, only around 1% of this consists of industrial space with the remainder consisting of office space.
Hungary’s industrial real estate market could be seen as underperforming in comparison with other major Central European markets. The Czech Republic, for example, has total industrial stock of more than nine million sqm, with an established market in several major industrial towns such as Pilsen, with 27% of total product under construction, compared to 20% in the Prague area, according to the Czech Industrial Research Forum.
However, Gábor Halász-Csatári, head of industrial at Cushman & Wakefield Hungary, argues that Budapest is in a similarly strong position to Prague, although Hungary lacks the regional hubs its peers have developed.
Cushman has traced a pipeline for this year of 260,000 sqm for Budapest and its surroundings, with 58% of the space under construction already prelet. JLL estimates that of the approximately 278,000 sqm of industrial space under construction, 50% is already prelet.
With regard to development strategies in the current climate of high demand and low vacancy rates, developers are constructing built-to-suit (BTS) facilities with an additional speculative element.
“Generally, logistics schemes have high prelet rates as they are BTS, but now we have registered planned projects that will offer more speculative space for several smaller tenants. Speculative development is driven by demand and there is a need for an increase in speculative development that would allow the market to grow,” says Halász-Csatári.
This article was first published in the Budapest Business Journal print issue of March 12, 2021.
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