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Limited Budapest Shopping Center Pipeline
Retail, along with hotel and hospitality, is seen by analysts as the most severely hit real estate market sector. Although hotel is expected to make a comeback, the retail sector is faced by the long-term challenge of the growing use of e-commerce.
By Gary J. Morrell
Hungary had been recording positive retail indicators as retail sales have been increasing steadily in recent years according to the Central Statistical Office (KSH). At the same time, Budapest shopping center development had been close to zero with developers wary of the longerterm level of consumer spending and increasing us of ecommerce.
In spite of these concerns, retail has continued to attract investors with several Budapest schemes changing hands and a number of these centers are undergoing refurbishments and repositioning in recognition of changing demands from consumers with regard to tenant mix and design.
Private consumption has been a major driver of economic growth and this has filtered through to the retail property market according to Cushman & Wakefield.
“The change has been a restructuring on the retail market, and as a result, strengthening of other specific profiles and concepts, such as leisure or F&B,” comments the agency. It puts shopping center stock in Budapest at 770,000 sqm, with the pipeline represented by one sole major shopping center development.
The major retail project under construction and destined to be
the first new shopping center in Budapest for several years, is the 55,000 sqm Etele Plaza by the Hungarian developer, Futureal, with a rescheduled handover of 2021.
The complex has been designed by the Hungarian Paulinyi & Partners Zrt. and Dyer, a multi-award winning architectural and design practice with a legacy dating back to 1964, operating in the United Kingdom and internationally, with studios in Moscow and Budapest. It will include around 180 retail outlets located at a transport hub at the Kelenföld railway station, metro line 4 and the approach section of the M1-M7 motorways. In addition to the retail and service elements, the complex will include the phased, 65,000 sqm Budapest One Business Park.
According to Futureal, the complex has 236,000 people within a 10-minute traveling distance and 500,000 plus within a 20-minute distance. A further 165,000 commuters are estimated to travel through the transport hub on a daily basis.
GOING WELL
“The project is going well and the remaining space is under negotiation. We are not pushing to close the remaining deals as there we have to do the fine tuning in terms of tenant mix,” says Tibor Tatár, commercial & retail development manager at Futureal Group, on the project. The retail sector has had to adapt to changing consumer habits and preferences in the threat of e-commerce with regard to both new development and the redesign of existing retail projects.
When it comes to design, rapidly changing consumer habits, the development of digital technology and the possible changes in the functions of buildings results in the creation of flexible and futureproof spaces according to István Vámossy, project designer of Paulinyi & Partners and co-designer of Etele Plaza. “We provide the background for development, transformation and even changes which cannot yet be anticipated,” he said.
“Etele Plaza will be the first major scheme on the Budapest market having a strategic location since 2011, when KÖKI shopping center opened. The center will most likely affect the shopping center market in general, due to its overall size and planned fresh trade mix, which will not only focus on the latest, and most popular brands, but will also accommodate new profiles based on changed customer needs, such as a larger food court and restaurant area, and more leisure elements,” adds Cushman & Wakefield.
JLL put total modern shopping center stock in Budapest at 720,000 sqm, which is low by European standards,
and represents a total shopping center density of 440 sqm per 1,000 inhabitants with an average shopping center size of 30,000 sqm; around a third are centers of more than 60,000 sqm according to the consultancy.
The leading centers are generally considered to be the 47,000 sqm Allee, the 58,000 sqm Mammut, the 30,000 sqm MOM center, the 66,000 sqm Arena Plaza, the 45,000 sqm WestEnd City Center and the 68,000 sqm Árkád center. These all have waiting lists for tenants and are therefore able to command the highest rents.
In addition to Etele Plaza, a number of center owners are planning refurbishment of their acquisitions. One example is the regional South African investor/developer, NEPI-Rockcastle, which is set to modernize and expand its recent
purchases, Aréna Plaza and Allee in response to the perceived market need to upgrade existing shopping centers with a strong focus on the food and beverage and leisure elements. NEPI Rockcastle acquired the 66,000 sqm Arena Plaza and an
adjacent 22-hectare development plot adjacent to Arena Plaza.
TENANT MIX
“The tenant mix of most schemes has always been mixed-use; however, focus on the F&B sector
Mammut Shopping Center
and unique leisure elements is stronger nowadays,” says Cushman & Wakefield. “Both profiles are logical reactions to the changed retail market environment, such as the strongly growing e-commerce. People may buy more and more products through internet, but they will surely leave their homes for good quality food and unique leisure experiences.”
With the easing of the governmental regulations against coronavirus in Budapest, NEPI Rockcastle Group, the owner of both the Arena Mall and Mammut Shopping and Entertainment Center, is striving to get back to more normal operations at its shopping centers.
“For NEPI Rockcastle the safety of its customers and tenants is priority. In favor of this, by accepting the government’s regulations, the company introduced further safety measures in their Budapest shopping centers with which shopping can be safer and enjoyable again,” says Erna Balla, operations asset manager at NEPI Rockcastle in Hungary.
She explains that the buildings are frequently ventilated and additional cleaning and surface disinfection protocols are performed regularly; frequently used furniture and equipment are disinfected hourly. There is limited access to furniture in common areas for visitors to decrease the possibility of getting close. “Besides the above, the owner placed hand sanitizing dispensers at numerous busy points in the properties. Shoe sanitizing mats are laid at all entrances of Mammut and mobile germicide lamps are disinfecting the air at the restrooms, while in Arena Mall this is done by ozone ionic machines,” Balla says.
“Social distancing rules are enforced through sticker markings in seating areas, corridors, elevators, and escalators. Operational staff, management staff, sales staff and all visitors are obliged to wear face masks and apply all other precautionary measures when entering the scheme. Both for Arena Mall and Mammut, it is extremely important that visitors feel safe and secure, so we are implementing the highest hygienic measures in our buildings,” Balla adds.
In Budapest, ECE’s 68,000 sqm Árkád center is currently the largest mall, the complex having been completed in 2002 and extended and renovated in 2013.
LONG-PLANNED
One long-planned mixed-use development including retail is Central Park by the Hungarian developer Granit Polus, located in suburban Budapest. According to the development plans, the project will consist of retail, office and residential elements. Negotiations with the planning authorities are ongoing.
From a retailer perspective, the Swiss chocolatier Lindt has extended its presence in Budapest with a new outlet at the Arena Mall shopping center. This is the first Lindt store in the Central and Eastern European region to feature the company’s updated store design.
“Although the basic part of the preparation of the Arena Mall lease took place last year, the first quarter of 2020 brought an unprecedented event affecting the whole world, which had a significant impact not only on the new store opening, but also on the whole economic
life, especially commercial trade,” comments Éva Sréter, head of retail at JLL Hungary, who represented Lindt on the deal.
With regard to regional development, Indotek, one of the most active shopping center owners at present in Hungary, recently acquired the Kleppierre shopping center portfolio. With this latest acquisition, Indotek now owns 14 large-scale shopping and commercial centers in Hungary, most of which the company plan to revitalize by refreshing their trade-mix, as well as undertaking refurbishments.
Etele Plaza retail project by Futureal.
At Debrecen, Szeged, and Szolnok Plaza, such work is already under way, whilst other projects are in the planning phase. Almost 200,000 sqm of retail assets have changed hands outside of the capital according to CBRE.
In addition to the Indotek portfolio, a number of other schemes are planned to be refurbished or are undergoing redevelopment in the capital as well, including the Mammut, Eurocenter and Campona shopping centers. Adventum International plans to undertake refurbishment of its recently acquired KÖKI center. “It is a general trend on the Hungarian retail market that the older shopping center schemes are now under repositioning and concept change. Part of the reason is the fact that a larger number of centers are truly outdated, not only from a tenant mix perspective, but also from an appearance and design point of view. A typical example for the most recent modernization is Shopmark (former Europark), which was one of the first centers on the Budapest market. Allee shopping center is also planning major changes,” concludes Cushman & Wakefield.
