Industrial properties – Market Report 2007/1

The market of industrial/logistic developments in and around Budapest seems standing still too, since out of the 150,000 square meters of new capacity planned for the year a mere 26,000 square meters were actually handed over in the first half of 2007. Such a slow developers’ activity produced a volume less than one half of the one in the same period of last year, and even this was thanked mainly to the booming city logistic developments within the boundaries of the capital.

The first phases of Mester Park (4,000 sqm warehouse and 8,000 sqm office space) and of Citypoint9 (4,200 sqm) – both in the district 9 – were completed, as well as the 5,000 sqm C-Moll project in South-Buda, next to Harbor Park. In the agglomeration only one delivery was recorded, the 13,000 sqm first phase of Segro’s Tulipan Park in Vendel Park, Biatorbágy. However, the picture is much brighter taking into account the further 90,000 sqm capacity already under construction: a total of 57,000 sqm in the logistic parks of ProLogis (27,000 sqm in Harbor Park, 16,500 sqm in Sziget Park, and 13,500 sqm in Budapest Park). In East Gate Business Park, which is still the only player in the eastern agglomeration, the already existing 16,500 sqm capacity is being expanded by a further 9,000 sqm. While on the submarket of city logistic facilities InNove’s first 6,000 sqm and the second phases of Mester Park and Citypoint9 are being developed. In addition, looking beyond the agglomeration we find ProLogis delivered its first building of 22,600 sqm in its new logistic park at Hegyeshalom (on the Austrian-Slovakian border), which has a total capacity of 148,000 sqm. In 1H 2007 the strong momentum of the demand side seen in the last months of 2006 remained present: lease agreements were signed for a total of 65,000 sqm space, which is 17% more than in the first six months of 2006. The most significant ones were pre-lease transactions for warehouses to be delivered in the second half of the year, with the biggest one signed by Tesco for the 15,000-sqm second building of Agrogate to be completed in October. While the only tenant for the also 15,000-sqm first building is Raksped with its 2,400 sqm need.

The most popular location was however the ProLogis Sziget Park in Szigetszentmiklós, where Behrtrans leased a total of 8900 sqm to be occupied in three steps by the end of the year, besides Filtrona (3,000+4,000 sqm) and NCR (3,500 sqm). While ProLogis Budapest Park, located next to the M5 motorway, saw high demand too, Geodis signed for 6,000 sqm, New Optic for almost 4000 sqm and Iron Mountains for more than 2,000 sqm here. Consequently, the southern region of the agglomeration was responsible for about one half of the total space rent. In the western region (close to M1-M7) Gefco leased 2,400 sqm in Segro’s Tulipan Park, Mid Atlantic Films (2,180 sqm) in Euro Business Park of IMV and ProLogis Harbor Park will accommodate Trilak’s 1,500 sqm and Herlitz’s 5,000 sqm new need. New city logistic parks have also seen their first tenants: Johnson Controls and Aldes moved into Mester Park, Color Life Benetton into Citypoint9. Due to the slow deliveries and the high demand of 1H 2007 vacancy rate has moderated. According to our calculation, including the buildings expected to come to the market by the end of the year, the available capacity is about 150,000 sqm in the capital and its agglomeration. We have not seen any major movement in rental fees since end of 2006. Typical monthly levels are 3.7-4.2 EUR/sqm in the logistic parks of the agglomeration – although amid fierce competition it can slide below this level –, while 5-5.5 EUR/ sqm in the city logistic parks within the boundaries of the capital.