The View 7th edition

38

INCREASING RETAILERS’ ACTIVITY, DECELERATING RENTAL GROWTH In the case of new retailer entries, CBRE registered 15 brands which entered the Hungarian retail market during 2018, falling short to the historic record measured four years ago, but up on 2017 figure. Primarily targeted destinations were landmark shopping centres over high-street downtown locations, 10 out of 15 new entrants opened their first stores either inTier-1 or Tier-2 shopping centres across the capital city. Despite the somewhat unfavourable VAT and global political environment, luxury fashion retailers proved to be the most active players on the domestic market, with six new openings on prime locations, offering a wide range of high-end apparel. Calvin Klein, Karl Lagerfeld, Philipp Plein or even Liu Jo can be found amongst the noteworthy newcomers representing the premium category, opening stores in Arena Plaza, on Fashion Street and along Andrássy út, respectively. Bentley (currently via franchise partner) as the first luxury car brand for a long time expanded into Hungary in 2018. This is likely to be followed by other premium car brands in the upcoming years. Demand for retail space in strip-mall schemes across the country also increased in 2018 driving vacancy down and leading to quality change in the tenancy in many centres as the purchase power profile of large regional cities continued to improve. While the footprint of cheap local and Chinese discounters shrank further, international chains across various product and price categories continued to expand in the aforementioned schemes.

mixed-use projects under construction with smaller retail components that will add significant retail GLA and expand the footprint of the downtown commercial zone. Some twenty new retail units on ca. 3,500 sq m will be added to the high-street supply (including Párizsi Udvar in 2019, and two projects on Szervita Square in 2020/21). These projects are already acting as catalysts in a retail resurgence of the street between Ferenciek and Szervita squares. Many new cafés and showrooms opened in 2018 and with increased footfall, more retail venues will follow. The market also awaits some large-scale mixed-use developments outside of the core city centre area (incl. Agora and Central Park in District XIII. and BudaPart in District XI.), which will include considerable retail components to serve office workers and residents in the developments and surrounding areas. While large, new projects still await to be handed over or even to commence, the market of secondary shopping centres have become more lively. Following purchase by add-value investors, several Tier-2 schemes with historically higher vacancy rates and weaker tenant mixes have recently undergone significant refurbishment and repositioning. Csillag Centre (formerly Csillagvár) and Shopmark (formerly Europark) both opened their gates in H2 2018 with stronger, widely-recognized retailers. This trend is likely to continue as Alba Pláza (in Székesfehérvár), Nyír Pláza (in Nyíregyháza) or Duna Center (in Budapest XIII.) have also been sold to add- value investors who are likely to undertake notable refurbishment and/or expansion in the coming years.

BUDAPEST

Regional Cities

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Rental Rates by Retail Format

Source: CBRE Research