Industrial properties – ESTON analysis 2010/1

The modern industrial stock did not grow much – neither in the capital nor in the greater metropolitan area in the second part of 2009.

Two new business parks extended their existing territories by 17,100 sq m altogether in the outer part of the 9th district, still inside the city borders. The final building of CityPoint9 (9,200 sq m) and the first phase of South Pest Business Park II (8,000 sq m) were delivered, from which the latter already reached 75% occupancy before handover.

In the greater metropolitan area, two new speculative developments were finished, offering approximately 30,000 sq m for rent. In the Eastern Region, bordered by the M5 and M0 motorways, Autoker Logistics Kft. extended the existing supply of M5 Gyál Business Park as a second part of the first phase, by 13,500 sq m.

In Dunaharaszti, Austrian IPD Group developed South Base Logistics Centre in two phases, now offering 16,000 sq m new warehouse and office space.

Solely one single BTS project was constructed in the past half year; Beltex-Ingatlan Kft. developed a new, 5,400 sq m building for BUNZL in the zone of Vendel Industrial Park in Biatorbágy.

Based on the above it is perfectly clear that the industrial development supply reacts very flexibly to market changes. Taking the high vacancy rate of the first half of 2009 as their basis, developers decided to postpone new development phases even if they obtained building permits for them. Or rather, only those with sufficient percentage of prelease were built. Nevertheless, total new industrial development volume for 2009 remained significant, as 166,000 sq m were built altogether, from which more than 70% in the first half of the year.

Concerning the whole year, lease renegotiations and extensions constituted the preponderance of the total take-up. However, tenant activity fell back – similarly to effects on the office market – therefore the total volume of new contracts was only approximately for 140,000 sq m. Tenants showed a livelier interest towards transactions in the final quarter: more deals were seen on the market than in the rest of the year.

Tenant demand for city logistics decreased, not more than 6,000 sq m was leased in total by new tenants in CityPoint9, Preston and South Pest Business Park.

The most significant deal in the agglomeration was also signed in the 4th quarter: CEVA logistics moved into ProLogis Batta for 38,700 sq m. Besides, Auchan signed a remarkable new lease in Viktória Industrial Park for 18,000 sq m.

Further significant new deals were mainly concluded in the M5-M0 East region, where the vacancy rate therefore dropped to 15%. Papyrus and Sauflon leased 7,000 sq m each, the former in BILK, while the latter in ProLogis Gyál. M5 Gyál Business Park greeted Elextronics as a new tenant, who signed for 5,000 sq m. The vacancy rate was around 19% in the greater metropolitan area and 26% within the city at the end of December.

Developers have valid building permits for more than half million sq m in the greater metropolitan area, which covers 14 modern industrial projects.

Development potential in city logistics is far more restricted as it lacks adequate volume of build-up areas. In addition, regulations on trucks – with a maximum weight of 12t and above – entering city zones also significantly influence tenants’ preferences as well. Business park tenants who can approach their premises free of charge via destination roads tend to stay in their current rentals, but those worrying about further regulatory restrictions look for new places around the M0 ring road instead.

Mostly due to the effects of oversupply, some deals in the past half year were concluded below rent levels pointed out by us. However, we believe that rents indicated in the table will be the norms in the long term.