Retailers Continue to be Attracted to Hungary


The leading shopping centers and high streets are performing well in Budapest in the view of most analysts, with secondary centers and locations doing less well, reflecting the changing expectations of consumers and tenants.

Allee shopping center in Budapest.

Real estate consultancy CBRE noted 15 new brands entering the Hungarian retail market in 2018, and these primarily targeted landmark shopping centers over high street locations. The retail market registered around 7% year-on-year growth in per capita sales last year.  

Shopping center stock in Budapest and across Hungary remains low by European standards with no new mall completions in Budapest since 2013. The hiatus in development has been largely due to concerns over the economy, and therefore the population’s spending power, and the possible longer-term impact of e-commerce on bricks and mortar retail with an eye on Western European retail markets.

“There is growing confidence with Hungarian consumers to use online shops to buy goods. At the end of 2018, the proportion of Hungarian shoppers buying online is on the same level as in the EU at 26%. An additional 8% of Hungarian consumers are also planning to purchase goods in the future. Between January and March 2019, the volume of sales in retail shops increased by 6.6%,” JLL notes.

The retail market in Hungary is seen as “consolidated” with low mall pipelines. At the same time, shopping center owners in the region are looking to redevelop existing stock in response to changing tenant and retailer demand. Landlords are in a strong position with waiting lists at leading shopping centers putting upward pressure on rents.

Indeed, demand for prime retail space is driving rental increases across the Central and Eastern European region. International brands now consider the markets to be mature and attractive from a consumer demand perspective.

Historic Low

Vacancy in the leading Budapest shopping centers has hit an historic low of 1-1.5% with waiting lists for space according to CBRE. The highest achievable rents for Budapest shopping centers is EUR 100 per sqm per month compared to EUR 170 for Prague and EUR 130 for Warsaw, according to Cushman & Wakefield.

“The concepts of the newly planned malls have changed to better serve the changed customer demand,” comments Viktória Szabó, head of retail agency at Cushman & Wakefield Hungary.

“For the same reason, a number of existing major shopping malls are also under concept change and re-modelling. The main targets are to increase the food offer within the malls, and secure new, interesting leisure elements. Developers are designing future schemes to have more entertainment and F&B elements. Unique leisure elements are design targets, in order to differentiate them from other shopping centers, attract more customers and increase dwell time,” Szabó says.

The next long awaited delivery in Budapest will be the 54,000 sqm Etele Plaza by the Hungarian developer Futureal, with a scheduled handover of the third quarter of 2020. Designed by Hungary’s Paulinyi-Reith & Partners and the Portland, Oregon-based Dyer Studio Inc., will include around 180 shops located at a transport hub where the Kelenföld railway station, Metro line 4 and the approach section of the M1-M7 motorways all meet.

Brownfield Regeneration

The hub is used by 165,000 people daily according to Futureal and the mall will be part of a bigger project that also includes the 65,000 sqm Budapest One office park. This is the second brownfield development undertaken by Futureal after the Corvin Promenade urban regeneration scheme that delivered a 44,000 sqm shopping center and 10,000 sqm of street retail, comments Tibor Tatár, CEO of Futureal.

Another major planned project is the Central Park project by the Hungarian developer Granit Polus, located in Districts VI and XIII. According to the plans, the mixed-use development will consist of retail, office and residential elements. Negotiations with the planning authorities are ongoing for what has been a long-planned development.

One other pipeline project is the 53,000 sqm Bogdáni shopping center by the German ECE, located in the Óbuda area of Budapest, also at a transport hub. ECE is waiting for new permits on the development, its previous set having expired.

“There are not many new shopping centers currently being built; new projects are rare and they are primarily multi-purpose schemes combining retail, quality catering, entertainment, office, residential and hospitality uses, all in great environments with top architectural designs,” says Jan Kotrbáček, head of CEE retail at Cushman & Wakefield.

“Older retail schemes on the market are undergoing the inevitable revitalization. Owners are forced to think about the future of their shopping centers and come up with new concepts,” he adds.

JLL puts total modern mall stock in Budapest at 722,000 sqm, low by European standards, as previously noted, and representing a total shopping center density of 443 sqm per 1,000 inhabitants. This compares to Prague with a total retail stock of 1.1 million sqm and only 35,000 sqm of space currently under construction.

The average size of a shopping center in Hungary is 30,000 sqm. The leading malls are generally considered to be the 68,000 sqm Árkád center, the 66,000 sqm Arena Plaza (now renamed Arena Mall), Mammut (58,000 sqm), Allee (47,000 sqm), WestEnd City Center (45,000 sqm) and the MOM Park (30,000 sqm). All have waiting lists for tenants and are therefore able to command the highest rents.

High Density

With regard to supply, Éva Sréter, head of retail at JLL Hungary, argues that the market has reached a relatively high density level, and therefore refurbishment instead of pure development is becoming more relevant. She cites the refurbishment of Shopmark by Diófa Asset Management and the extensive redevelopment of Campona by CPI Property Group as examples of this.

The strength of the sector is seen by the way it is attracting investors as South Africa’s NEPI Rockcastle, which acquired the 66,000 sqm Arena Mall in fall 2017. This was the first entry of the prolific regional investor/developer into the Hungarian market, and the company also purchased a 22-hectare development plot adjacent to Arena. The company has a policy of redeveloping and extending its acquisitions as a long-term investor and building owner. NEPI Rockcastle followed up the Arena deal with a further acquisition when it purchased the Mammut shopping center a year later.

The Czech Republic is the CEE destination of choice for international brands. Of the around 80 brands that entered the CEE region last year, 28 chose the Czech Republic, with Poland a close second with 26, according to Cushman & Wakefield.  

Most new bands come from the fashion sector, a trend that has persisted for several years. However the food and beverage sector is gaining in importance as it continues to bring new concepts to Hungary and the region.

“Shopping centers will have to change their position to become closer to the local community by creating an authentic environment and hiring local people,” says Kotrbáček.

“Competition will extend from the numbers (i.e. sqm and the number of stores) to the experience. In this regard, architecture will play an important role, because retailers and brands will need to present their product in an exceptional environment. Subsequently, brands will prefer statement and reference shops to be recognized and identified with on the market,” he adds.

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