Retail

Market Report H1 2018

Office market

In the first half of 2018 office areas of around 75 thousand square meters were handed over in five office buildings, which surpasses last year’s volume (5,500 m²) significantly. The main parts of the new areas were finished on Váci Street (about 60 thousand square metres). The biggest newly handed over building is Promenade Gardens (22,500 m²).

The building of further new office buildings, about 462 thousand square metres, has started; out of this 168 thousand square metres could be handed over until the end of the year (10 buildings). The office stock of Váci Street will probably surpass one million square metres in 2020. This means that the current office stock (25% of the market) will remain the largest sub-market in Budapest.

Industrial and logistics property market

Until the middle of 2018 new halls were handed over in three logistics parks with a total area of over 30 thousand square metres (out of which 25,691 m² is warehouse and 4564 m² offices). The size of the area handed over is significantly smaller (30%) than it was a year ago, but the completion of more, big sized units is being planned until the end of the year. The biggest new handed over building is located in Inpark Páty, and is used as a warehouse by Euronics (12,200 m²).

The major part of the 113 thousand square metre logistics property (100 thousand m²), which is being developed, is expected to be handed over this year. By this the annual development volume will grow by 11% compared to 2017. The biggest growth can be expected in Üllő Airport Logistics Center; here 85 thousand square metres can be used by tenants in the two halls before the end of the year.

Investment

In the first quarter of 2018 economic growth in Hungary grew by 4.4% compared to last year’s result. This is one of the most significant GDP growth measured in the EU. In the January-May period performance grew in several fields: industry (3.1%), construction industry (6.9%) and tourism (number of guests: 7.1%, income of commercial accommodation: 11%). Inflation in the first half of the year stood at 2.3%; in case of durables deflation could be seen. Labour-market indicators continued to improve; unemployment rate fell to 3.7%, employment rate increased to 69.1%. Average net income surpassed by 12.1% last year’s data in the January-May period.  Base rate stills stands at 0.9%, the Hungarian forint weakened significantly compared to the euro (HUF/EUR 328.6).

Please, click on the title for the full report (pdf).

Retail properties – ESTON analyis 2010/1

The second half of 2009 did not show many new actions from retail market point of view. The crisis had already changed the playing cards of developers, therefore the situation of market players did not vary significantly in contrast with the first half of the year.

In Újbuda, Allee (45,000 sq m) shopping mall was opened exactly according to plan in November. Looking back, it still has an unbroken record of success, which can mainly be explained by its central location. Allee
The triumph of Allee is unquestionable from an investor’s point of view as well, as nearly 2 months after the handover, from many inquirers, finally Allianz SE bought a 50% stake in the property.

Among the developments that were supposed to be finished by the end of 2009, Corvin Atrium and Europeum Hotel and Retail Complex have been postponed. Although Europeum reached shell and core status, the opening has been postponed in absence of adequate quantity and quality of tenants. Apart from this, the hotel operator, Marriott, will certainly open the 4-star Courtyard Hotel with 235 rooms in spring of 2010.

Among office developments comprising small retail units, a total of 2,200 sq m of Eiffel Square Office Building was added
to the retail supply, from which Costa Coffee leased 300 sq m, while newspaper distributor chain Inmedio rented 260 sq m.
Starbucks, market leader in coffee bars operating in the same price range, may also enter the market soon, according to market rumours.

Costa, owned by British restaurant-, hotel- and club-owner Whitbread Group PLC, aims to lay the foundation of its Eastern
Europe expansion firmly in 2010 by having given a cash offer to the acquisition of the Polish company Coffeeheaven at year’s
end. They offer 24 penny (~74 HUF) for each share, and would take the lead in the operations of 90 existing coffee shops, 4 of
them in Hungary.

Since November, coffee fans have been given a chance to refresh themselves in BookCafe as well, which is in a very prestigious
location, in the restored Paris Department Store, operated by Alexandra Bookstore.

The ‘books & coffee’ concept is not a new-fangled idea, but the method of selling books while offering other complementary services for customers at the same time is a continuously growing phenomenon.

First KÖKI Terminal (50,000 sq m) is expected to be handed over among the mixed-used developments in Budapest, and will reach shell and core status at the end of 2010, according to the developer. The other projects have been partly rescheduled compared to plans of the previous half year, as follows.

Retail atad eng

The small retail units along the streets of Budapest were put in a more difficult position than shopping malls by the crisis.
Several unique initiatives have been started across the capital to lure customers. Noticeable as a new phenomenon, the number of participants and the significance of theme streets have increased. This is also owing to the fact that local authorities offer generous discounts to those tenants who fit out their retail units in accordance with their business profile requirements.

“Design District Budapestâ€? has been founded recently by linking together the design shops of the 5th district, embracing little boutiques selling unique fashion goods, home accessories and other design specialties. Their main goal was to tempt some of the mall shoppers back again to the streets of the city centre. The traders of Király Street have joined forces as well to
popularize the area by offering collective commercial sales and campaigns in order to occupy a worthy position in the system of
theme streets.

Retail catering units have also chosen cooperation instead of competition. The bars and restaurants of Hajós Street advertise
themselves together despite their different profiles, hoping that this way they will be able to follow the lead of Ráday Street, Liszt Ferenc Square, or Jókai Square.

The boom of downtown retail units is in close correlation with regional development and positive changes in the cityscape.
Development has not stopped in the 11th district in the least, after Allee was completed in Buda. Within the scope of BARTÓK cultural city centre program, at the intersection of Bercsényi Street and Bartók Béla Street they are bringing back the coffee shop spirit of the 20’s in the following years. Based on the preference system of the local authority, new, differentiated rents have been defined based on business qualities to motivate new galleries, clubs, workshops or quality service providers and restaurants to settle in. In case of meeting all of their criteria, renting a ground-floor, street-front retail unit complying with
European standards and with highly preferred profile could cost as much as 6 €/sq m/month on the side of Bartók Béla Street,
close to Gellért Square.

The local authority in the 2nd district has also worked out an action plan to re-create the centre of Inner-Buda. Upon
completion of community investments, quality transformation and profile changes can be expected for some of the area’s retail
units. These retailers have also joined together to advance traffic reduction and developments as soon as possible. According to the expectations of the district, the number of baby & mother care shops, quality (children’s) bookstores, toy stores, shoe & leather goods shops will increase as a result of gradual changes in shop functions.

To sum up, retailers in the capital are expecting from the rehabilitation of the region to revive ailing high streets, by this
means the shops as well.

Development has not stopped in the countryside either in the recent period. Renovation and creation of pedestrian shopping streets is under development in several larger cities of the countryside, mainly from EU funds/sources.

There were no surprises regarding new shopping malls here either. Dunacenter (12,000 sq m) was handed over in Győr,
which is equally owned by CA Immobilien and Holler Ivan Group Real Estate Foundation. Zala Park (17,800 sq m) debuted in Zalaegerszeg as the first development of ConvergenCE outside the capital, creating approximately 250-300 new jobs. Strip mall developers shifted 1-2 years in their development schedule in comparison with the first half of the year. STOP. SHOP projects are continuously keeping pace with Family Centres, although in the end no new malls were delivered in the
second part of 2009.

There has been no major change in retail rents since the first half of the year, as like in other segments, landlords tend to
offer individual discounts and longer rent-free periods to attract anchor-tenants.

For further information please contact our experts or visit our site at www.eston.hu and read the full report under „Our publicationsâ€?.

Infiniti has arrived: Infiniti Europe introduces a new car brand on the Hungarian market. Auto trader Gablini, who is the sole trader of the brand, will open the first showroom in June in �trium Park, on Váci út. The deal was concluded with the aid of ESTON International, the co-exclusive agent of �trium Park.

Infiniti Europe and Gablini Group have recently signed a contract about the exclusive distributorship of the premium car brand in Hungary. The first European Infiniti saloon was opened in October 2008 and since then several dealerships have opened one after another around Europe.

Gablini Group began to search for the most suitable showroom for the luxury dealership at the end of 2008. “Finding the right unit required great foresight as we had severe expectations from the display area to be developed. Besides, it also had to match the strict regulations of the Infiniti brand. We imagined the ideal setting on the ground street level of a busy office building, in Pest, close to the city centre, with good parking possibilities.â€? – says the sales executive, Ã?kos Kovács.
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While viewing the possible locations, Ã?trium Park with its large glass window façade, special and solid elegance appealed the most to the company’s managers so the deal was successfully concluded in March 2009.

Gablini
“It is a pleasure to be an elemental part of the constantly developing Váci út. Ã?trium Park is a real dash of colour and pioneer of this office corridor. It satisfies all of our previous expectations both regarding its inner and outer qualities.â€? – added the owner, Gábor Gablini.

According to Szabina Kriston, senior consultant of Eston International’s retail division, the well-defined vision of the client made the negotiations with the developer, WING Zrt. very smoothly. As a result of this prosperous cooperation, all conditions have been fulfilled in order to open the first Infiniti showroom and sales point in Hungary on more than 220 square meters on the ground floor of Ã?trium Park.

As a consequence of the economic crisis, the volume of sold new cars has decreased everywhere around the world. In Hungary, 54% less new cars have been sold than in the same period last year. Nevertheless, the introduction of the new premium brand seems to prove that the premium positioned products with high quality will always be in need. Let it be a luxury office, a residential estate or clothing items.

ESTON-analysis – The rise and fall of factory outlets

In the past 5 years more and more retail developments flooded the surroundings of Budapest. During these years it turned out that not all of the many similar projects can be successful.

Eston International consultants examined 3 outlets in Budapest, from which the first two opened in 2004. The projects started at the M0 motorway, not far from each other, by having almost the same name: Budapest Outlet Centre, and Budapest Outlet Center. Developers claimed at that time that their choice of the place and name were completely accidental. They believed that the proximity of the two developments will only boost their sales, since, at the beginning, different brands settled in each establishment. Later correcting the identical names, the two projects became known as GL Outlet and Premier Outlets Center.

The main characteristic of the factory outlet is that the products of each brand are offered much cheaper, at a price at least 30% lower than downtown retail prices; in addition, former collections, unsold stocks are also distributed by these shops. This concept attracted plenty of brands which had not been present in Hungary previously. For them it was easier to enter the market by paying a lower rent at a busy place on the edge of the city to explore further possibilities for trade expansion.
Based on the experience of Eston experts, the key factors to ensure success in the inceptive period of a retail project would be the following:

1. good location
2. easy and obvious accessibility
3. visibility
4. well chosen marketing strategy
5. attractive tenant-mix
6. good concept
7. critical consumer mass

In the case of GL Outlet, probably no prudent location survey was prepared before the building commenced. From the seven success factors indicated above, especially the absence of the “good locationâ€? was conspicuous. Premier, on the contrary, before and after its opening launched an aggressive campaign in all means of the media. Therefore in the shoppers’ minds, the words ‘outlet’ and ‘premier’ involuntarily linked up together.

Regarding its location, it is situated by a slip road, and is clearly visible from the main road; whereas, the competition settled by a less busy part of the M0 motorway, in the neighbourhood of a hypermarket on the decline.

As for the tenant-mix, the filling of empty retail spaces requires great foresight in the beginning of the investment. Some of the big brands do not tolerate well if shoppers buy overdue collections from the outlets only, instead of the full-price products downtown. Therefore it is quite difficult to persuade them to represent themselves outside the city. In order to create the perfect tenant mix, owners leave some retail units empty even for months rather than letting it to a tenant that does not fit into the atmosphere.

Besides the elaborated tenant-mix, Premier used turnover-based rents, which means that tenants pay the rent as a defined proportion of their gross income on top of a fixed rent.

In spite of the bad “kick-offâ€?, GL still had a positive attitude towards the market and tried everything that is possible and written in handbooks for managing a situation of this kind. They tried to boost trade turnover in two steps: firstly they changed the management company, secondly, their profile. Since then it turned out that these changes resulted in no success, which was also illustrated by appearing on the “black listâ€? of APEH (Hungarian Tax and Financial Control Administration) in time, as a debtor.

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In the meantime, the third competitor (being a competitor almost only in its name) M1 Outlet opened next to Premier, however, few months after the opening it already closed. Premier emerged as a winner again and continued the previously started fierce competition. They even changed the access to their premises by transforming the entry road in order to attract the other outlet’s customers.

Besides the partisan attack of Premier, it is important to see that the failure of M1 mainly rooted in its mistaken concept. The underground parking lot, built to compensate the scarcity of outdoor parking spaces, made the shopping more time consuming; furthermore, the multi-storey layout was less transparent than the traditional shopping-street style. Regarding its tenant-mix, M1 showed a rather mixed image: from food stores through drugstores to crèches, the services included almost everything. Although not all the fashion stores offered their products on outlet prices. As it seems mixing the ‘outlet’ and the ‘shopping mall’ concepts could not please the customers neither with the architecture, nor with the product line.

According to the experts of Eston International’s retail division, the following ingredients are elementary for the ideal functioning of an outlet:

– Be the first on a given market – even if this means only one month ahead of the competition’s appearance
– Carry out continuous market research (beforehand, and regularly after the opening): focus groups to explore the customer needs
– Most effective layout: ~20 000 sqm “shopping villageâ€?, sufficient free parking spaces inside
– At least 2 million people should live in the outlet’s surroundings within 1-hour drive
– The shops shall be open till late night, for the comfort of customers coming from work
– Differentiate brands, refresh the tenant-mix – otherwise the customers will get bored easily with the steady supply

Success is not guaranteed even if all these rules are observed. It is sure though that in crisis, high-quality, durable products –especially at a lower price – are the shoo-ins.

By examining the outlet concept, it seems that we are facing a build-up which is fundamentally crisis-resistant. Here customers can select from discounted products all year long. There is still development potential east from Hungary as well; new projects have started with success. In Central and Central-Eastern-Europe – excluding Poland – outlets appeared lagging behind the western market: the first outlet opened in Prague in 2007, in Romania in 2008, while the first one in Slovenia will only open in 2010. Hungarian outlet market is still unlikely to be overloaded; just the rightly professed triple rule of “location, location, locationâ€? has to be implemented well.

For further information please contact our experts or visit our site at www.eston.hu and read the full issue of Property Watch under „Our publicationsâ€?.

Eston International conveyed retail units for two international retail chains on downtown boulevard

Eston International successfully contributed to two lease transactions not long ago: German drugstore chain Schlecker and Russian-owned Rosinter Restaurants lease new retail units downtown on the main boulevard

Market-leader Schlecker drugstore chain who is present in 13 countries leased its freshest Budapest retail unit with the help of Eston consultants. The larger-than-average (1000 sqm) retail unit is located on Margit körút which is becoming more and more popular nowadays. The unit was previously leased by Schlecker’s competitor, Rossmann.

Eston found another popular location for the Russian-owned Rosinter Restaurants’ new opening on the boulevard: its 400 sqm large Il Patio restaurant will shortly open on József körút, opposite to Corvin-köz. Rosinter operates more than 200 restaurants worldwide.

Eston International represented the owner in both transactions.

“International retail chains still very much favour downtown locations for their retail units in Budapestâ€? – Adorján Salamon, CEO of Eston International says. However, central “prestige-zonesâ€? expand towards New Váci utca, Deák tér, Kiskörút and Andrássy út, it is still Old Váci utca and a few alleys nearby that are most demanded. Eston International successfully contributed to several retail transactions – Mr Salamon pointed out – including portfolio management and acquisitions serving banks, restaurant-chains, pharmacies and other retail chains, for whom Eston consultants can offer various well-located retail options with optimal size.

Retail properties – Market Report 2007/2

The year 2007 was rich in records on the market of retail properties and, within that, in the segment of shopping malls, in particular.

For the Christmas season, the largest shopping mall of the country and, at the same time, that of the region, Arena Plaza was completed, with gross rentable area of 65,000 square meters, on the territory occupied earlier by the Trotting Field. This huge shopping mall accommodates the first Budapest outlets of several brands (for instance, Pull&Bear, belonging to the Inditex Group, Behrska, Stradivarius, or Peek & Cloppenburg) and the whole of the area was rented, months before the opening. Presence in the newest and largest player of the market is an attractive opportunity, even if its location and the date of its opening were not the luckiest choices. The huge shopping mall is difficult to access by public transport, it lies halfway between two underground stations, and its completion took place in a year when retail trade turnover fell.

After a relative silence in the last couple of years, the construction of further shopping malls with about 150,000 square meters is planned or already started by the developers – e.g. Köki and Neo in Kispest, an ING project on the place where Buda Skála stood. The completions are expected in 2009-2010. Meanwhile, on the market of shopping malls in the countryside, the aggregate volume of development projects in process is of a similar order of magnitude, but there, some of these will be completed in the coming months: the shopping centre of Wallis Real Estate: Agria Park in Eger has been handed over and further completions follow in Nyíregyháza, Miskolc and Debrecen (Ã?rkád). Ã?rkád in Szeged shall open in 2009, according to the plans. In the upcoming five years, a total of 25 shopping centres shall be built countrywide.

Agria Park
Simultaneously with the completion of the giant shopping centre, there was a revival on the market of retail outlets in the inner city of Budapest as well. In addition to a total of almost 20,000 square meters of new shops in Fashion Street in Deák Ferenc utca and V1, built on the site of the ORI headquarters and including both office space and luxury homes, there are still some vacant retail outlets in the side streets of Váci utca. Like on Andrássy út as well, where rentals soared due to fee increases by owners, on the basis of the long-awaited coming of luxury brands. After Louis Vuitton, Gucci is expected to come within short, and an opening of Burberry is also increasingly probable.

In 2007, important completions were made in the outskirts of the city as well. Next to the airport, Market Central Ferihegy was built by AIG, with 44,000 square meters – fully rented out already several months prior to its opening. At the western gate of Budapest, the last phase of Premier Outlets Center (6000 sqm) was accomplished and it became similarly popular to the first two phases. In its immediate neighbourhood, M1 Outlet Center (16,500 sqm) can be opened within month. This is intended to be a mix of a traditional factory outlet center and of a classic shopping centre. In the framework of the Tópark development project at Törökszentmiklós, a 100,000 square meters shopping centre shall be ready by 2010 according to the plans, and Solaris at Budaörs shall also enter the market with a significant size of retail premises.

As to rental fees, the most marked change could be observed in the case of retail properties on Andrássy út. Their monthly rental fees came up from the previous levels of 25-35 euros, one year ago, to the level of 40-60 euros, already earlier usual in the area of Váci utca. The prices in the other market segments did not change that much. In the most favoured shopping centres the average monthly fee per square meter is 100 euros, in shopping centres on the outskirts of the city, an average of 20 euros is required.

Read further details and the full report here.

Hungarian developer Wallis’s HUF 10 bln Agria Park mall in Eger to open in March

Agria Park, a HUF 10 bln shopping mall and entertainment center built in the northeastern Hungarian city of Eger by Hungarian developer Wallis, will open in the first half of March, the daily Nepszabadsag reported Thursday.

Construction of Agria Park started in February 2007, on the site of a former tobacco factory built in 1896 and abandoned by Philip Morris in 2004. Agria Park will have 21,800 square meters (sqm) of space, including 18,800 sqm of retail area, 1,600 sqm of offices and 1,400 sqm of warehouses. The retail area of Agria Park will include around 100 shops, as well as 1,500 sqm of entertainment and 2,300 sqm of restaurant areas. Wallis said recently that the mall was already 80% pre-leased as of December. Exterior works on the building, which incorporates the old factory building and a new modern wing, have now been completed by main building contractor Market Epito, also a member of the Wallis group.

Source: Interfax

Coffee chain combat seen taking shape in Hungary

Malta-based café/bistro chain Café Jubilee and Spanish coffee specialist Jamaica Coffee Shop are among the nearly 100 exhibitors at this year’s International Franchise Exhibition BuyBrand Show to be held between 15 and 17 November in Budapest. Competition between coffee chains in Hungary is seemingly becoming fiercer.

Café Jubilee decided already in June that it would start looking for franchisees in Hungary, Romania, Slovakia and Bulgaria. It is reportedly seeking a master franchise partner in Hungary.
Café Jubilee was established in 1998 by Alex Scicluna with his brothers Mario and Anthony after having operated another restaurant and commercial catering operation.
The first outlet was opened in Victoria, the capital of Gozo which is Malta’s sister island. A second outlet was opened in Valletta, the capital city of Malta, in 2000.

After a period of consolidation a third café was opened in Gzira, a popular shopping and entertainment area, in 2005. At the same time the International Division of Café Jubilee was established.

Café Jubilee estimates set-up costs of a franchise at around EUR 150,000 to 300,000, which includes an initial all-inclusive fee of EUR 40,000, equipment, fixtures, stock, training and -all the necessary working capital to successfully establish the business.

The ongoing franchise royalty and management services fees are set at EUR 2,750/3,650 Euros.
The company demands the facility to be at least 110 square metres.
Café Jubilee’s menu in Hungary would feature Maltese (60%), local (20%) and international cuisine (20%).

The Maltese chain will presumably not be the last to enter Hungary. AmRest, the operator of Pizza Hut and KFC restaurants in CEE, with around 200 stores in the Czech Republic, Hungary and Poland, signed a non-binding preliminary agreement this March with coffee chain Starbucks Coffee International to take Starbucks into these countries. Rumour is that the first Starbucks coffee shop will open in Budapest in 2008.

Jamaica Coffee Shop, founded in 1994 and headquartered in Barcelona, operates 109 establishments and is present not only in Spain, but also in Andorra, China and Portugal.
Eston International already mentioned Jamaica Coffee Shop as a potential newcomer in Hungary back in June.

It speculated that besides Starbucks, a number of other chains might decide to come to Budapest. It said Coffee Republic, the number one café chain in London, which already runs two stores in Bulgaria, intended to open more in the region. -Le Pain Quotidien from Brussels, which is not a real café but a superb alternative with top quality organic coffee and homemade bread and pastry, has not directly targeted the CEE region, but is already present in Moscow and Istanbul,” Eston noted.

Source: Portfolio.hu

Retail outlets – Market Report 2007/1

After a relative still last year, the Budapest market awaits another large shopping mall to be completed. According to the promises of the developer, Plaza Centers, Aréna Plaza, offering space for 200 outlets on 68,000 square meters, shall be completed in October 2007.

The transport connection of the new shopping mall is a bit poor in a comparison with the usual standards, as it is not easy to access either by public transport or by car. In addition, it is close to one of the most successful shopping malls, �rkád. Still, given that Aréna Plaza shall be not only the newest, but also the biggest one among the competitors, tenants do not want to be left behind, in spite of its weak points. This is why contracts were already concluded not only with tenants known from other Budapest shopping malls, but also with premium brands like Tommy Hilfiger, Boss, Ralph Lauren, Paul & Shark, Lacoste or Peek & Cloppenburg.

In the next two years, no further shopping malls are expected to open in the capital, but preparations are in process for several development projects. These include, the construction of Neo Center (with 17,000 sqm of retail space and 17,000 sqm for offices) at Határ út, in southern Pest – where Europark is also considering an expansion – and Köki, just one stop with the underground from there. ING plans to complete its shopping mall in 2009, to be built on the lot of the former Buda Skála department store, where the demolition works have already started. Meanwhile, the shopping mall fever seems to have reached the eastern part of the country, where in the next 12-18 months, larger shopping and strip mall openings are planned in Eger, Miskolc, Nyíregyháza and Debrecen.

In downtown Budapest, the ING project on Vörösmarty square (with 6,000 sqm area already rented) is expected for completion, after several delays, also in October 2007. With a full refurbishment of Deák Ferenc utca, the Fashion Street of Immobilia created a total of 11,000 sqm of new retail area, highly in demand. In addition to branded garment shops, a restaurant also opened here, the first unit of Vapiano, an Italian restaurant chain with German background. In the former stock exchange building, Orco is only planning its shopping gallery of 9,000 square meters, while the overhaul of the former Luxus department store may be ready by October 2007, to accommodate two Spanish chains, Behrska and Stradivarius. The retail outlets of the refurbished Klotild Palace, 2,000 square meters shall be completed soon, but also in the side streets of Váci utca, there are shops waiting for tenants.

Next year, Gucci shall open a shop in Budapest. According to the news, as opposed to Escada, moving to Dorottya utca, Gucci shall have opted for Andrássy út, to become a neighbour of Louis Vuitton. Another luxury brand, the British Burberry is also expected to appear soon. In downtown, several mixed-purpose development projects are also underway or under preparation, where in addition to hotel space, the implementation of significant retail areas is also planned, like in Europeum, at Blaha Lujza tér, or, in a more distant future, in the project at the site of the Ballet Institute, on Andrássy út. Meanwhile, at a proven location on the outskirts of Budapest, at Biatorbágy, two projects are underway, for completion by the end of 2007. In the last, third stage of Premier Outlets Center, on 6,000 sqm, 20 shops will be accommodated. Next to that place, but with an even faster access from the motorway, the M1 Outlet Center, to be ready also in the fourth quarter of the year, shall not follow the strip mall layout, but shall be a two-level shopping centre. The developer, FTB Invest implements shops of 23-800 sqm on the 16,500 square meters area available, for outlets offering luxury and Category A brands. Also in the suburbs, close to the airport, the Ferihegy Market Central project of AIG Lincoln is underway, with 44,000 square meters. The two strong magnet tenants, Tesco and Praktiker reserved 65% of the area, and there is strong interest in the smaller shops as well. Along the eastern sector of M0, where the offer does not include any shopping mall or hypermarket yet, in the coming months, several new projects are expected at the motorway junctions.

In the coming years, the German Aldi discount chain shall be an increasingly active player of the retail outlet market in Hungary, in particular, in the countryside. Even though the opening dates were further postponed and are expected now only for 2008, these shall take place, in addition to Budapest, in seven cities, namely Gyôr, Zalaegerszeg, Pécs, Szeged, Debrecen, Miskolc and Veszprém. In 2007, the rentals of the retail outlets in the capital are moving upwards. An exception thereof is Váci utca, where the new offer coming to the market does not allow to move away from the range of 80-100 EUR/sqm. At the same time, due to the strong demand on Andrássy út, the monthly rentals per square meter increased from 25-35 euro a year ago to above 30-50 euro, whereas the monthly rentals of the shopping centres with the highest vendibility persist at around 100 EUR/sqm.

aAIM to buy Arena Plaza in Budapest from Plaza Centers

Plaza Centers N.V. has executed a binding agreement for the sale of its Arena Plaza shopping and entertainment center in Budapest to UK-based Active Asset Investment Management (‘aAIM’), one of the UK’s fastest growing commercial property investment groups.

In September 2006, aAIM launched a £2 billion acquisition programme for its European Symmetry Fund in partnership with Bank of Scotland. The estimated consideration for the acquisition of the Arena Plaza shopping and entertainment center is approximately €400 million. The purchase price will be finally determined on the completion of the transaction, which is expected to take place within a month of Arena Plaza’s opening date, on the basis of the actual rent levels achieved being capitalized at an agreed yield.

Plaza Centers will remain responsible for the letting of the center’s remaining units for a period of up to one year following the closing, and is anticipated to benefit from further price adjustments reflecting the signing of any additional leases during the two consecutive earn-out periods, which end three and 12 months respectively following the completion.

The company’s management estimates the final transaction price based on actual rent levels will be no less than circa €380 million, with an overall transaction price cap of €400 million, as agreed with aAIM. The final expected transaction price represents a significant upside comparing to the project’s estimated value upon completion at the time of the Company’s Admission to trading in November 2006, which was circa €333 million.

Designed and developed by Plaza Centers following the acquisition of this landmark site by the Company in late 2005, Arena Plaza is Hungary’s largest shopping and entertainment center. It comprises 220 stores located throughout approximately 66,000 sqm of lettable area and is serviced by over 2,800 parking spaces. The center is scheduled to open in the fourth quarter of 2007 whereupon, subject to the fulfilment of certain conditions, the transaction will be completed. Amongst the international anchor tenants of the center are Tesco, the Inditex Group and Peek & Cloppenburg, together with other major retailers such as H&M, Electro World, Hervis and C&A. Additionally, Arena Plaza will accommodate a 23-screen Cinema City complex, which includes Hungary’s first IMAX theatre. The centre is currently over 85% pre-let. The profit from the sale will be recognised mainly over 2007 with adjustments in 2008 and, in part, distributed in accordance with the Company’s dividend policy, announced following its successful listing on the London Stock Exchange last November.

Ran Shtarkman, Chief Executive of Plaza Centers, said: “Arena Plaza is one of the largest and most prestigious shopping and entertainment centers in Central and Eastern Europe, the design and ambition of which has set new standards for the region ever since we first acquired the site in late 2005. In developing Hungary’s largest shopping center, we have provided an exciting new commercial center for Budapest and a compelling destination for national and international tenants and visitors. Upon completion, the project will represent our 25th shopping and entertainment center in the region and our 17th shopping and entertainment center in Hungary. In addition, we have fifteen other projects in our pipeline in different stages of development.

Source: CEE Commercial Real Estate News