Retail Development Finally Taking-off


Although consumer demand in Hungary is continuing to rise, with 7% year-on-year growth in retail sales for the first half year, the shopping center stock in Budapest and across Hungary remains very low. Development is now starting to take-off, although the next significant delivery is not scheduled until late 2020.

Allee shopping center in Budapest.

“After years of limited pipeline volumes, we see increasing development activity on the retail market throughout the country. The overall active monitored pipeline currently adds up to circa 140,000 sqm, excluding the planned extensions of several landmark shopping centers in Budapest, such as Arena Mall and Campona,” said CBRE.  

The Hungarian unit of the California-based commercial real estate services and investment firm puts the average vacancy rate in Budapest shopping centers at 1.5%. The city has not seen any shopping center deliveries in recent years, with projects put on hold due to concerns over economic issues and consequently consumer demand. However, market conditions are now regarded as appropriate by most analysts for the delivery of new Budapest malls that would freshen the market. There is also significant development activity in prime high street retail in central Budapest.

“Demand by retailers is surely present on the market, due to multiple reasons,” comments Viktória Szabó, head of retail at Cushman & Wakefield Hungary. “A strong economic environment, expanding local and international brands and the need for fresh new schemes and retail concepts are all encouraging further market improvement.”  

CBRE has registered the entry of eight new international retail brands into Hungary in the first half of 2018. However, the number of new entrants is low in CEE terms, and Hungary is not the target country for brands penetrating the region for the first time; new entrants are mostly registered in Czech Republic and Poland according to Éva Sréter, head of retail at JLL Hungary.

The next planned delivery will be the 53,000 sqm Etele Plaza by Futureal, due for completion in 2020. Etele Plaza is located at a transport hub at the Kelenföld railway station, the Metro 4 underground line, and the approach section of the M1 and M7 motorways. The hub is used by 165,000 people daily according to Futureal and the 55,000 sqm project will consist of around 180 retail outlets. The development project also includes the 65,000 sqm Budapest ONE office park. This is the second brownfield development project by Futureal after the Corvin Promenade urban regeneration project that has delivered a 44,000 sqm shopping center and 10,000 sqm of street retail.

“Etele Plaza, which is the only shopping center currently under construction, was fully pre-let before the start of the development works n the plot, which shows that there is a healthy demand for new shopping center projects,” says Sréter.

Etele Plaza by Futureal.

Long Awaited

Another long awaited pipeline mall is the 53,000 sqm Bogdáni shopping center by the German ECE, located in the Óbuda area of Budapest, again at a transport hub. ECE is waiting for new permits on the development. In contrast to Etele Plaza the location has no obvious competitors, according to Stréter. ECE has developed five shopping centers across Hungary in Budapest, Győr, Pécs, Debrecen and Szeged. In Budapest, ECE’s 68,000 sqm Árkád center is currently the largest shopping center in the country. Completed in 2002 and extended and renovated in 2013, it was the last major shopping center delivery in Budapest.

The Central Park project by the Hungarian developer Granit Polus, located in Districts VI and XIII, has a retail, office and residential elements. Negotiations with the national and local governments are ongoing for this long-awaited development. Another long-planned pipeline Budapest development project is owned by the Polish developer Echo Investment. That plot has the required planning approvals needed.

“The newly planned schemes have the opportunity to tailor-make their developments to the changed needs of retailers – be it a larger food court area, a new leisure element, etc. Meanwhile existing older schemes are working on renewing their projects, in order to keep up with the new trends, and changed market environment,” says Szabó of Cushman & Wakefield.

“Differentiation is a must, not only due to the increased number of large shopping center projects in the city, but also due to new global trends within the sector. Among the need for newly expanding retailers (completely new on the market) landlords of new schemes will most likely pay special attention to both ensuring a substantially larger food element within their centers (food court, food halls and traditional restaurants), as well as working towards securing attractive leisure elements, in order to ensure an extended dwelling time by customers,” she adds.

JLL puts the total modern shopping center stock in Budapest at below 800,000 sqm, which is low by European standards. The leading centers are generally considered to be the already mentioned Árkád center and Arena Mall (formerly Arena Plaza, 66,000 sqm), Allee (47,000 sqm), WestEnd City Center (45,000 sqm), Mammut (44,000 sqm) and MOM center (30,000 sqm). These all have waiting lists for tenants and are therefore able to command the highest rents.

In the Budapest high street market the Párisi Udvar project by the hotel developer, Mellow Mood is scheduled to deliver 2,500 sqm of retail space on Ferenciek tere adjacent to the same developer’s hotel development. Close by, Horizon Development is developing another retail component at its Szervita Square mixed-use complex.

Arena Mall  (formerly the Arena Plaza).


Sréter actually argues that the market has reached a relatively high density level when it comes to supply, and refurbishment instead of pure development is becoming more relevant. She cites the on-going refurbishment of Shopmark by Diófa and the extensive redevelopment of Campona by CPI and the acquisition of Eurocenter by WING, which will undertake a value add strategy for the center.

“Hand-in-hand with the strong demand figures, investment activity remained strong during H1 and the overall volume invested in retail assets is likely to improve significantly with major schemes already under offer or currently being actively marketed,” CBRE says of the retail investment market.

In its first entry into the Hungarian market, the South African NEPI Rockcastle, a prolific investor/developer elsewhere in the region, has acquired the 66,000 sqm Arena Mall and also purchased a 22-hectare development plot adjacent to it. The company has a policy of redeveloping and extending its acquisitions as a long-term investor and building owner.

Diófa, meanwhile, is scheduled to reopen the rebranded Shopmark shopping center later in the year after redevelopment of the earlier generation shopping center.

Outside of the capital, retail development is limited, although there are some small pipeline projects of less than 10,000 sqm, typically retail parks and strip malls. This is in contrast to other central European countries, which have thriving retail development markets with large retail projects being undertaken by established developers in regional cities.

“We are experiencing a more moderate retail expansion in most European markets in general. This is rather a result of the global changes experienced within the industry. Strengthening of e-commerce has resulted in an increased need for new, alternative concepts in shopping centers, targeting the renewal of the overall shopping experience,” concludes Szabó.

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