Hungary for success

Next year, the FTSE group, which oversees the London stock exchanges,
is to grant Hungary and Poland ‘Advanced Emerging Market’ status.
‘Eurobuild Poland’ takes a look at the most important real estate developments
taking place in our southern neighbour

As with elsewhere in the CEE region, the vast majority of high quality office space being developed is situated in the capital city. Since 2005, the amount of modern stock coming onto the market in Budapest has grown impressively, reaching a level of 182,527 sqm completions during 2006. The first half of 2007, however, saw only 38,800 sqm completions – a mere 21 pct of the total for the previous year. Nevertheless, DTZ’s Budapest office is expecting 2007 to break the record, since a number of significant projects started in 2006 are to have come online before the end of 2007. The agency is predicting that 220,800 sqm of office space will come on to the capital’s market by the year’s end, bringing the total figure for office stock up to 1,952,402 sqm. DTZ expects prime headline rents to remain stable in Budapest at around EUR 17 per sqm monthly, with most letting transactions agreed at the headline rate of EUR 12-14. Yields are likely to bottom out at around 5.75 pct by the year end, with vacancies also steady at app. 13 pct.

Office projects

The largest office project completed in the first half of 2007 was the first phase of Átrium Park by the Hungarian developer Wallis Real Estate. This is situated in the currently popular office location of the Váci út corridor on the main road heading north from Budapest’s Central Business District. The first phase of this development brought 16,100 sqm online and once completed in the first quarter of 2008 there should be 31,000 sqm of office space with the complex, with the remainder of the total 56,000 sqm taken up by storage, retail, leisure and conference facilities. In November, Austrian group Immoeast bought Atrium Park for EUR 100 mln in a forward purchase agreement. Immoeast’s subsidiary CPB Immo was also responsible for the next biggest project completed in the first half of the year: Mester Park I. This building, which is located close to the Hungária Boulevard in district 9 to the south of the city centre, offers 8,310 sqm of office space, as well as just over 4,000 sqm of storage and showroom space. The intention of the developer is that by 2010 the entire Mester Park complex will hold 250,000 sqm of leasable space in what they describe as a “New Business City”. The zoning plans for the scheme have already been approved.

Park life

The completions in the second half of the year, however, are already dwarfing those of the first. Towards the end of the summer, Raiffeisen Ingatlan finished the development of the Aréna Corner Office Centre. This app. 28,000 sqm building with 3 interconnected towers, had already changed hands, as the Endurance Fund managed by the Orco Property Group acquired the property in July for EUR 63 mln. In September, German group IVG Immobilien completed Infopark ‘D’ – the fourth building of the Inforpark complex, which the company claims to be the “first technology and innovation park in Central and Eastern Europe”. Building D has added 18,000 sqm of leasable space to the park, bringing the total so far up to app. 80,000 sqm. Before the end of 2007, work should begin on building E, which will bring another 15,500 sqm to the park’s total upon completion in the third quarter of 2009. Infopark is in district
9  close to the city centre.

Of the projects about to be completed, chief amongst these is the 36,298 sqm Gateway Irodaház building from Israeli developer Ablon. This lies along the Váci út corridor, and already has a tenant for 24,000 sqm of the available space, after Hungarian Post signed a 10-year leasing deal in the summer.  Népliget Center A, on the Outer Ring on Budapest’s ‘airport corridor’, is also due to be ready before the end of the year. Developed by Skanska, the just over 10,000 sqm first phase will have another 16,000 sqm added in subsequent stages. At the beginning of 2008, the first buildings of the Corvin Promenade city regeneration project should bring another 17,900 sqm on to the Budapest office market. The scheme, which is being carried out in partnership with the city and Futureal, envisages an eventual 150,000 sqm of gross leasable office space. The entire project is due for completion in 2012.

The retail market

The retail boom in the CEE region continues apace, and Hungary is no exception to this phenomenon. In November, Plaza Centers opened its 66,000 sqm leasable space Arena Plaza shopping and entertainment centre at the eastern train station in Budapest. Already fully-leased, this complex includes a 10,000 sqm supermarket, 220 stores and an IMAX cinema with 23 screens. The sale of the centre to Active Asset Investment Management (aAIM) of the UK has also been finalized, changing hands for app. EUR 400 mln. Another recent project has just started with the demolition of ING Real Estate’s Budai-Skála centre in South Buda, to be replaced by
a complex with 40,000 sqm of retail space and a 5,500 sqm leisure area, as well as 6,800 sqm of offices and 85 residential units. This project is expected to be completed at the end of 2008. In district 19 to the south-east of the CBD, Chayton Duna Property began the construction phase of the mixed-use Neo Center in October. This complex includes 17,000 sqm of retail space, a 5,000 sqm leisure centre and 17,000 sqm of offices. R-CO Ingatlanforgalmazó – set up by private Hungarian individuals – is also planning a mall at Kõbánya-Kispest, at the end of the blue metro line. This centre, for which a timetable has yet to be decided upon, will have around 50,000 sqm of gross leasable space, 180 retail units and an OBI DIY store.

Shopping malls are also making an appearance in Hungary’s other big cities. The 15,000 sqm Vértes Center in Tatabánya opened in May, developed by the Európa Real Estate Investment Fund – part of the HVB Bank group. In 2008, Devirs International plans to complete the 23,000 sqm Magellán Center in Szombathely, whilst Wallis Real Estate is developing Agria Park (21,800 sqm) in Eger. The 19,000 sqm Korzó Shopping Center in Korzó from Unicredit Leasing in Nyíregyháza is expected to open in April 2008.

October saw the opening of the most significant project outside the capital: AIG/Lincoln’s Market Central Ferihegy commercial park close to Budapest Airport. This is
a novel concept in Hungary, based on an open-air format employed in the UK and the US, featuring 44,000 sqm of big box retail stores, shops, catering and offices.

Strip tease

Another new concept on the Hungarian retail market are strip malls (see box). Sybil Holding is introducing the idea in the capital with Új Buda Center – the second building of which is due to be completed in 2008. This is located at the former Cable Works Southern Buda site and features 15,000 sqm of retail outlets and an 11,000 sqm entertainment and recreation centre. Outside Budapest, The Stop Shops chain is planning to develop strip malls in Gödöllõ, Debrecen, Kaposvár and Keszthely; Family Centers is looking to do the same in Gyõr, Hódmezõvásárhely and Sopron. Park Center, which already has strip malls in Siófok and Zalaegerszeg, is also planning such projects in Nagykanizsa, Dunaújváros, Szekszárd, Tolna and Mosonmagyaróvár.

The industrial market

DTZ is predicting that 160,000 sqm of industrial space will have come online during 2007, bringing the total stock to around 1.1 mln sqm. US warehousing giant ProLogis has several logistics parks at varying stages of development in the Greater Budapest area. One of these – ProLogis Park Budapest – is in Gyál, 5 km to the south east out of the capital, 103,500 sqm of which will have been completed by the year’s end. ProLogis Harbor Park on the south western fringe of Budapest currently has 102,000 sqm completed, with another 50,000 sqm coming in the next phase. Also in the south is ProLogis Park Sziget, which has 75,000 sqm developed to date. A further 100,000 sqm of potential space could be developed at a site owned by ProLogis at Batta outside the capital, the first 15,000 sqm phase of which is currently under development. Immoeast will have completed 30,000 sqm of warehousing space in the aforementioned Mester Park by the end of 2007, a site which has
a build-in potential of 380,000 sqm. At the moment warehouse rents outside Budapest are somewhere between EUR 3.5 and EUR 4 per sqm monthly, rising to EUR 4.5-6.5 inside the capital.

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Nathan North