Never in a month of Sundays

When it came into effect on March 15th, the new law prohibited the opening stores bigger than 200 sqm on most Sundays, while smaller retail formats will only be allowed to open on Sunday if run by the owner or her/his close family members. Thus both domestic and foreign retail chains are now unable to do business seven days a week. “The only exception from the ban will be Sundays during Advent and one freely chosen Sunday a year,” says Eszter Fazakas, an attorney and the head of the commercial practice of Noerr Hungary. “However, some basic retail services, such as pharmacies, bakeries and florists, will be able to remain open,” she adds. However, these rules are not the end of the list of the newly-introduced shopping restrictions. The working hours for every kind of store during the rest of the week will be limited to 6 am to 10 pm only. For this reason, most malls will continue to operate on Sundays, offering customers access to all the retail and service outlets that meet the criteria set by the new legislation. The selective approach towards the ban on Sunday trading raises questions of a legal nature. “The owners of mixed-services shops cannot be sure how to comply with the law. Furthermore, whether the aims of the legislation, namely to provide a period of rest on Sundays to employees, can be achieved remains questionable with such differentiation,” adds Eszter Fazakas.

Museum shops to close too?

Although similar regulations are currently being introduced in a number of European countries, including some of the more mature economies, observers of the Hungarian market are viewing the domestic Sunday trading ban as rather outdated and unnecessary. “Regulation of Sunday trading is a movement in the opposite direction to that currently taking place across the continent,” complains Viktória Szabó, a partner and the head of retail at Cushman & Wakefield Budapest. According to Benjamin Perez-Ellischewit, the director and head of capital markets at JLL Hungary, the Sunday shopping ban is “yet another measure targeting retailers, following the food supervisory fee, for example,” and “surely cannot help an industry recovering from years of sluggish activity caused by the financial crisis.” The Sunday Closure Act is not yet applicable to shops located on UNESCO world heritage sites (for example, Andrássy út – one of the main shopping boulevards in Budapest). “A bill on extending the Sunday Closure Act to also apply to world heritage sites has been tabled in the Hungarian Parliament and is now waiting to be passed. If the parliament adopts the bill, shops situated on world heritage sites will have to remain closed on Sundays as well,” explains Eszter Fazakas.

Knock-on effects

While the lawmakers believe the legislation could have a positively impact on restaurant and leisure businesses by encouraging people into visiting more non-retail properties in their spare time and travelling more frequently over the weekends, they also argue that the restrictions are aimed at significantly enhancing the quality of life, both of retail sector employees and customers. But in a recent Ipsos poll, over 66 pct of Hungarians surveyed said they were against the ban. The researchers also found that when the new law came into force, app. 22 pct of Hungarians did some Sunday grocery and household goods shopping on average, with the number being much higher among the fast-growing group of urban professionals, who appreciate the convenience and flexibility of doing shopping on Sunday. Property and retail sector players are naturally concerned about reduced revenues. “We expect that the impact of the regulation will be seen in around nine to twelve months’ time, when the market reaches a new state of equilibrium. A decrease of around 8–12 pct in the retail performance is expected; however, this figure will vary between the different retail sectors and formats,” explains Viktória Szabó. Retail sector employees are also becoming increasingly anxious about possible layoffs. The Hungarian trade unions have said they will attempt to block the controversial regulation through calling a referendum. How will all of this affect the country’s recovering real estate market? “What is clear is that the impact will vary dramatically between retailers and locations. Out of town weekend destinations are likely to suffer the most, while centrally located assets with a more compact catchment area will be impacted less, as local consumers can more easily move their shopping times to a week day,” says Benjamin Perez-Ellischewit of JLL. “It is too early to say what the impact will be on retail activity and the owners of retail properties, as we will only be able to see in the next few months how customers are adapting to the situation by changing their consumption patterns,” he adds.

Beyond the EU’s regulatory power

In the European Union, Sunday trading law is regulated at a member state level. Officially regarded as more of a socio-cultural issue than one of market access restriction and discrimination, Sunday shopping prohibition remains strictly within the realm of the national – and sometimes also the municipal – authorities. But what does fall within the scope of EU law is the minimum weekly rest period: 24 uninterrupted hours for each seven-day period, in addition to eleven hours’ daily rest, as stated in the EU’s Working Time Directive. Over the years, EU member states have experimented with a plethora of Sunday trading regulations, including limited opening hours, as well as specific restrictions on the size and character of a store that can operate on Sundays and the number of Sundays in a year when retailers can run their businesses. While in some cases the sanctions stem from a country’s historic or religious heritage, in other cases they have been driven by the changing political or economic climate. The most complex and strict Sunday trading regulations are currently in place for retailers operating in such countries as Belgium, France and Germany. In other EU countries, for instance in Poland, Sunday working hours remain unregulated (with the exception of public holidays).