Center owners are essentially concerned with redeveloping and upgrading their retail, leisure and services offer and looking to enhance the retail experience to meet ever more sophisticated demands from consumers.
Perceived consumer, and therefore tenant, demands include an improved F&B offering, a more varied shop mix and what are seen as imaginative designs. Where there are retail developments, they are generally part of larger mixed-use projects, retail parks or strip malls.
According to Anita Csörgő, head of retail at Colliers Hungary, there is market demand for larger retail parks and strip malls of up to 20,000 sqm. Outside the capital, Hungary lacks the larger provincial cities of other Central and Eastern European countries.
Despite the developmental concerns for the retail market, the evidence is that there is still a preference for the brick-and-mortar retail experience in Hungary, combining shopping and other leisure activities. According to Cushman & Wakefield, offline stores maintain their dominance in the retail landscape, accounting for more than 90% of retail sales.
As elsewhere in CEE, developers are currently opting for smaller provincial retail formats such as retail parks and strip malls that provide more flexibility for retailers and where developers do not need to commit to the higher critical mass of tenants required to build shopping centers. The mall stock in Budapest is low by European standards, and there is little prospect of oversupply with low-to-zero vacancy rates, particularly for the top-tier centers.
One ongoing Budapest project is the suburban Zugló Mall by the residential constructor and developer Bayer Property Hungary, which will provide around 11,000 sqm of retail in District XIV as part of a mixed-use project that includes office and residential elements. The developer is aiming to create what it terms as a new city quarter.
Another ongoing mixed-use development in the same district is theCentrale multifunctional complex by the Hungarian Chain Bridge Ventures, which is being developed at the Puskás Ferenc Stadion metro station on the M2 line. The 29,000 sqm project will provide service space, an F&B hub, an office center and a hotel at the residential and commuter hub.
Chain Bridge Ventures is a relatively new boutique developer formed by partners with experience as investors. The complex, designed by Bánáti + Hartvig Architects, will include 40 shops and service outlets on a 6,000 sqm area on the ground floor, including a supermarket, drugstore, pharmacy, banks, telecoms, FMCG and beauty services and a 2,000 sqm F&B area. The retail areas are more than 50% preleased.
Duna Plaza, arguably the first modern shopping center in Hungary and Central Europe, will be demolished and rebuilt by 2028 in its location on Váci út, an area with extensive residential and office stock and development.
In a rare new development, the circa 6,000 sqm Dera Park being built by Hungarian developers in Szentendre (a former artist’s colony, now a popular tourist destination about 22 km north of central Budapest) is fully let and due to deliver in 2025.
Retail sales remain strong, and rentals are increasing, particularly in the countryside, but the stock level is static, and Hungary has the lowest shopping center density in the CEE region. The current Hungarian stock is divided between shopping centers (the dominant form in the capital) and retail parks (the leading force outside the capital). Some 35 new shop brands have entered the Hungarian retail market since 2019, according to Cushman & Wakefield.
Cushman & Wakefield put the total modern shopping center stock in Budapest at around 815,000 sqm, and it has traced a total of 1.3 million sqm of shopping center space across Hungary. In addition, there are 1.6 million sqm of retail parks and warehousing nationwide. CBRE has traced circa 2.1 million sqm of modern retail stock in the Greater Budapest area, including 910,000 sqm of shopping center space.
Many leading Budapest shopping centers have changed hands since completion, and owners have conducted or are planning redevelopments and renovations. The six leading centers in Budapest are close to full, while second-tier centers have a 6-10% vacancy rate, according to CBRE. Of the 22 shopping centers spread across Budapest, only eight meet institutional investment standards, according to Cushman & Wakefield. Few investors are currently prepared to commit to such large lot sizes, and some are not prepared to invest in the Hungarian market at all.
In one of the latest refurbishments, the retail asset manager Multi Corporation, as center manager and designer, has completed the refurbishment of the Allee Shopping Center, enhancing the “interior and exterior design and investing in sustainability to pave the way to carbon neutrality.” The complex has received Breeam “Outstanding” accreditation following the renovation.
Outside of Budapest, one avenue for retail development is retail parks with a large hypermarket or food content that, in turn, attract brands offering lower-priced products. These have a lower critical mass than shopping centers and provide flexibility in lease sizes for tenants, often in areas of the country where there has been limited modern retail provision.
Further, a number of retail parks in regional cities are attracting investors. Adventum is committed to redeveloping its Tesco-anchored hypermarkets across Hungary. Outside the capital, there are development possibilities of between 4,000 and 7,000 sqm, often adjacent to or including a food market.
This article was first published in the Budapest Business Journal print issue of October 18, 2024.
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