Industrial properties – Market Report 2007/2

Whilst in the other segments of the market records keep falling, the market of industrial-logistics properties for rent had another silent year. During 2007, a total area of 85,000 sqm were completed, well behind the 150,000 square meters planned for the year and the 140,000 square meters of one year earlier.

The total stock by the end of 2007 was close to 1 million square meters. Both completions and total capacity are quite modest, in a regional comparison and, in addition to that, as opposed to other countries in the region, modern facilities for rent are almost exclusively concentrated in the capital city and its surroundings. This concentration appears to be melting a bit, as in 2007, the initial phase of the first major development project in the country was completed, next to Hegyeshalom and, with the expansion of the Schengen borders in December, cities near to the country borders, such as Nyíregyháza or Szeged, as well as Záhony, with its special situation, may come into the focus for potential tenants, and so, for the developers.

In 2007, however, the most important increase was observed not in the countryside, but rather on the market of the so-called city logistics properties, within the boundaries of Budapest: the development of Dél-Pesti Üzleti Park (South Pest Business Park) was accomplished and, also in District IX, in the first phase of InNove Business Park, 8,000 square meters, in Mester Park and in CityPoint9, 6,000 square meters each and in Újpest, the first 20,000 square meters of Europa Center were completed.

inNove kicsi
On the market of city logistics, we expect active movements in 2008 as well. The developer of CityPoint9, Convergence Capital, for instance, starts such a development project of a total 25,000 sqm in District XV. In the logistics parks in the neighbourhood of the capital city, the level of completions in 2007 was low, 32,000 square meters. In the meantime, in the parks of ProLogis in the neighbourhood of Budapest, warehouses with an area of 60,000 sqm are under construction, in Vendel Park, 16,000 square meters are being built.

With the construction of the eastern sector of M0, slowly becoming a reality within reach, we expect a rocketing increase in interest towards the eastern portion of the conurbation, both from tenants and developers. After a successful début of East Gate Business Park, the first development project here, new investments start in the southern portion of the sector, close to the airport, for instance, the Ablon Airport City project between Vecsés and District XVIII, where after full completion, 47,500 square meters will be offered for rent. Together with that, areas suitable for development might be appreciated, in particular, the ones next to motorway M31, connecting M0 with M3.

As opposed to the silence on the offer side, demand was somewhat more active than a year earlier. In 2007, contracts concluded covered a total of about 170,000 square meters, while in 2006, a total of 140,000 square meters. The largest transaction was the extension of a 26,000 square meter rental by a German freight forwarder, Fiege, in the Harbor Park of ProLogis. And the most significant new transactions were: Tesco rented 15,000 square meters in Agrogate, at Zsámbék, Behrtrans almost 9000 square meters in the Szigetszentmiklós area of ProLogis, while Philip Morris and Filtrona rented 7000 square meters each – the first one in the East Gate Business Park of Wallis, the latter also in Szigetszentmiklós.

In the Tulipán Park of Biatorbágy, a logistics service provider, Eurogate, rented 6000 square meters, Puma: 2300 sqm and Gefco: 2000 sqm. This means that in the second half of the year, one of the most popular locations in the western portion of the conurbation became the facility of Segro. On the East, in EGBP, another 9000 square meters were taken up by tenants like GE Hungary Energetika (2400 sqm), TP Logistic (1600 sqm), Central Drinks (4750 sqm) and an automotive industry supplier. And city logistics parks attracted tenants like Chio-Wolf Hungary, Color Life Benetton or Obi (CityPoint9), Johnson Controls (Mester Park).

The rentals in city logistics parks became somewhat lower than in previous years: within the city, the typical level was 5.5-6 euros/sqm/month, in the neighbourhood of the capital city, 3.8-4.5 euros/sqm/month in 2007. On the demand side, the needs for larger areas also cause a downward change in rentals. In the case of rented space for logistics purposes, it was already observed in other countries of the region that instead of the companies providing logistics services, their clients are looking for warehouses, directly. The emergence of this trend in Hungary coincided with the bankruptcy of Rynart. With the fallout of this logistics service provider, tenants of its warehouse capacity of 130,000 square meters appeared on the marketplace again.

Read further details and the full report here.