Significant Industrial Pipeline for 2022 Despite Slow Q1
11,500 sqm of space was delivered at Prologis Park Budapest-Sziget II in Q1.
First-quarter delivery for the Hungarian industrial market has been described as restrained, although the total pipeline for the year, if delivered, could match the record annual level recorded in 2021.
Prologis delivered 11,500 sqm of space at its Budapest-Sziget II park and 6,700 sqm in Tatabánya, for a total of more than 18,000 sqm of space in the quarter, according to Cushman & Wakefield. The sizeable new supply and the high proportion of preleases are an indication that developers and tenants are attracted to the industrial market.
Total modern industrial stock in the Budapest area stands at approaching three million sqm, according to the Budapest Research Forum (CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary). There are few, if any, logistics buildings with large areas of contiguous industrial space available.
Cushman has traced 2.8 million sqm of modern industrial space in the greater Budapest area and another 1.3 million sqm in the countryside. With a total of 4.11 million sqm of space in Hungary, stock per capita is below the Central European average.
The Czech Republic, for example, has total industrial stock that is rapidly approaching 10 million square meters across several different logistics hubs, according to Cushman & Wakefield. An additional 1.5 million sqm of space is under construction, predominantly in Brno, Ostrava and Olomouc.
“The new supply has not yet managed to keep pace with the excessive demand, leading to the new record low vacancy rate of 1.6% in the Czech Republic, from which the share of vacant areas in Prague decreased to only 0.7%,” said the consultancy.
Slovakia, meanwhile, has around 3.2 million sqm of industrial space across the country, with an overall vacancy rate of 5%. Cushman has traced 407,000 sqm of space under construction, primarily being delivered on a speculative basis.
Regional Heavyweights
In terms of stock, the leading industrial developers in Hungary are Prologis, closely followed by CTP, both regional heavyweights. Behind these come Bilk, Wing, Indotek and the state-owned National Industrial Park Management and Development Company (NIPÜF). Several of these have development strategies across Hungary.
Vacancy is put at 4.2% in greater Budapest compared to around 4% in the regional cities and slightly over 4% for Hungary overall. Approximately 23% of the greater Budapest pipeline is preleased, according to Cushman & Wakefield. Demand for the first quarter showed a significant 53% year-on-year increase on Q1 2021.
“2022 first quarter leasing activity further accelerated, demonstrating continuous positive market sentiment in the industrial sector,” says the consultancy. “Total take-up amounted to 125,000 sqm with an 82% share of net take-up largely represented by buildings currently under construction,” it adds.
“New supply arriving in the market was somewhat restrained, especially compared to the record high numbers of the previous quarter, reaching 166,350 sqm in the Greater Budapest area. The 2022 pipeline, however, is significant, with the forecasted delivery of 407,800 sqm of industrial space,” concludes Cushman & Wakefield.
This article was first published in the Budapest Business Journal print issue of May 20, 2022.
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