The pace of growth for the logistics property market had somewhat slowed down over 2005. The growth in supply in 2005 (approx. 140,000 sqm) was modest, considering the amount of space handed over in 2004 (approx. 200,000 sqm). A drop in demand was shown in the changing ratio of releases and speculative developments as the volume of the latter exceeded the volume of space signed for in advance.
Still, we feel that the outlook for the logistics sector is positive: the outsourcing of related activities is ongoing. According to some research, logistics costs, half of which can be associated with warehousing expenses, can comprise up to one tenth of total revenues depending on the type of goods. Increased efficiency is thus essential and can be achieved through the services of professional logistics companies. In keeping with this idea, the modern warehousing sector is dominated by such ventures; the expansion of their capacities is ultimately achieved through the expansion of their leased space.
During the year, the first 10,000 sqm unit (rented out to Transped) was handed over in the Parkridge CE Developments project, which is one of the latest logistics parks in Budapest and surrounding area. Second in the queue of park tenants will be Quadrant CMS, leasing a 4,000 sqm property. Exel has extended its expiring lease agreement in the Europolis M1 Business Park where Advanced MP Technologies signed a new contract and Willi Betz has expanded its premises. In Waberer’s BILK development, 100,000 sqm have been completed so far; construction continues with the new logistics center of the Hungarian National Bank (MNB), the planned completion date of which is 2007. As our previous report mentioned, the 27,000 square meter Schenker property has been occupied in BILK, the related lease contract expires in 15 years.
General Motors signed for 12,000 sqm of space in the Euro-Business Park, closing the largest deal in 2005. The leased area of Harbor Park in Nagytétény (sold this summer) amounted to 8,000 square meters in 2005, Anda Present and TNT are among the tenants. At the end of 2005 there were serious negotiations for another ten thousand square meters at the park purchased by Prologis. 18,000 square meters of warehouses were handed over at Prologis Park Budapest, a Prologis-related logistics project by the M5 motorway.
The latest logistics project from Wallis Real Estate, called East Gate, can be found at Fót; Eston is the exclusive agent for the project. The project’s initial phase includes the delivery of 5,300 sqm of build-to-suit offices and warehouses and 4,700 sqm of workshops. Occupancy of the first on-spec unit is currently under negotiations, this phase will amount to ten thousand square meters, and the handover is planned for the end of May 2006.
Logistics-base developments for CBA and Alexandra publishing were followed by two similar schemes in 2005; bicycle manufacturer Neuzer settled in Esztergom while Thenus decided to go for Győr (5,400 sqm). The number of research and development sites is also increasing as Merkantil Bank is providing GE with a new 39,000 sqm center based upon unique requirements.
According to our research, the heavy concentration of logistics premises in the South-Western agglomeration will ease with the continuing construction of the M0 ring. In line with this, a stronger upswing in demand was noticeable at the Northern end of the city, especially on the Pest side.
Rental fees for modern logistics premises continued to decline slightly. These warehouses are available for rent in the 4 – 4.8 €/sqm range, and a major shift in fees is not expected for 2006 in this balanced segment. Used warehouses offer a wider range of rental fees; the lower end of the mid-year rent interval (3.5 – 5.5 €/sqm) has increased slightly (to 3.8 €/sqm). We expect the largest deals for logistics premises in the next 12 months to arise from the renegotiation and extension of expiring agreements; other major transactions are expected to be related to professional logistics providers.