Stripping for the clientele

Want to make money in retail? No space for more shopping centres in Budapest? Don’t worry - go to the countryside! This is the latest slogan for developers eager to take a risk in starting strip mall projects all over Hungary 

Nandor Mester

As the latest wave of big shopping centre developments comes to an end in Budapest,  Hungarian and foreign developers are looking for opportunities in smaller cities. German and Austrian companies are acquiring old industrial plots and buildings for such projects, while some prefer green field investment.

Most of the strip malls that have already opened, and those to come in the future, are between 10-15,000 sqm in size and situated in towns with less then 50,000 inhabitants. With the size of Hungary’s population, and with the existing or firmly planned retail projects in several cities, the potential is enormous for at least the next 3-5 years. One example of this is the Israeli firm Casaro, which is expected to deliver two smaller schemes (Piramis Centers of around 7-8,000 sqm each) in Törökszentmiklós and Tiszaújváros - cities that both have populations below 40,000. The company recently announced plans to start a similar centre in late 2009 in Szekszárd. All these centres contain 25-40 shops, restaurants and banks over a total area of 7-10,000 sqm.

International excitement

Two Austrian firms have also become involved in this business. Centre Invest is developing three centres in Gyöngyös, Keszthely and Békéscsaba, while its rival company, Centre Management Invest (CMI), is to develop a large chain of strip malls called Park Centers. CMI has already completed malls in Dunaújváros, Nagykanizsa, Siófok, Szekszárd, Mosonmagyaróvár and Zalaegerszeg, with a combined area of 62,000 sqm, and plans to add schemes totalling another 16,000 sqm of retail space in Miskolc and Debrecen in 2008 and 2009 respectively. Foreign funds have expressed an interest in buying these retail formats, with the UK-based Mosaic Property CEE having already purchased a portfolio of seven strip malls for an estimated EUR 70 mln from CMI early this year. Mosaic also bought three other strip malls from CMI for EUR 35 mln last August.

Magnum Hungaria, the local branch of Austrian Real 4 You, is interested in building more Family Centers in 10 smaller cities throughout the country, with a total area of 90,000 sqm. These centres are largely situated in retail parks, and offer 10-12,000 sqm of retail space. Some would call these centres semi-strip malls, as apart from featuring large open parking spaces and a one-level building, the facilities are very much stand-alone big box units, rather than a specific mix of shops or stores with different offers.

Small but perfectly formed

Size does matter, warn the experts. Strip malls in Hungary range between 10,000 sqm and 30,000 sqm and are growing rapidly. One of the first was Ablon’s Buy-Way mall that is located at the southern edge of Budapest (Soroksár) as part of the Auchan retail park, adjacent. The park consists of a hypermarket, and big stores, such as Electro World, Bricostore, Kika and Decathlon. Buy-Way was completed in 2005, and has app. 11,900 sqm of leasable retail space.

Ablon has another similar sized development in the northern suburbs (Dunakeszi). The reason given for this location by the company was that bearing in mind the commercial circumstances of a other areas like Soroksár or Dunakeszi, there was no sense in building a big strip mall in the latter districts due to the relative maturity of the area. Others, however, beg to differ - among this group is AIG/Lincoln, which has developed a very successful strip mall at the southern edge of the capital, close to Ferihegy airport. Market Central Ferihegy came on to the local market last October with 44,000 sqm of leasable space. It is relatively hard to judge how much money they can earn in the long run, but retailers are saying that sales are slightly above the average that they make in stand-alone stores or approximately the same that they would make in classic shopping centres elsewhere in Hungary.

At the crossroads

Strip malls are not yet the most popular format of shopping centres. Polimeni International is a company which has decided to invest in such properties. It intends to develop 15 such centres in three years near medium-sized cities and towns. They have been given the working name of Centres at the Crossroads. The first will be in Sochaczew, an hour’s drive from Warsaw. Monika Łukawska, Polimeni International’s marketing manager, remarks that: “We are keeping away from the major Polish cities since shopping centre saturation in these places is great. Our retail parks will be situated on the outskirts of town, but will have excellent transport facilities. They will be targeted at car-driving customers, who want to get their daily chores done rapidly  and have little patience for walking around large shopping centres.”

Such fourth generation shopping centres have at least a dozen tenants, large car parks and are 10,000 sqm and more than 20,000 sqm in size. They are easy and cheap to construct, the land near smaller cities and towns has not reached huge prices, the buildings are simple and rapid to build, and all of which is reflected in tenancy rents.

Monika Łukawska continues: “Competition on this market is becoming fiercer. Our projects fulfil the needs and absorption potential of a local market. It frequently happens that centres three times the size are established in nearby neighbourhoods, but even so we are convinced our retail parks will prove more competitive, since they save customers a lot of time, not having to hump their shopping around so many shops.” n

Contribution by Emil Górecki