The View 7th edition

51

COUNTRYWIDE INDUSTRIAL DYNAMICS

New industrial supply across the country (excluding the Greater Budapest developer-led industrial stock) amounted to ca. 332,000 sq m in H2 2018, boosting the annual volume to 545,000 sq m – down by 23% y-o-y but still the second highest completion volume registered in the past decade. Roughly half of the annual new supply volume came in the form of developer-led projects, mostly pre-let or on a BTS basis. The modern industrial stock across the country totalled 9.11M sq m by the end of 2018, of which 3.16M sq m was developer-led and generally operating on a lease basis, while the remainder constituted the owner-occupied stock. The majority of the developer-led stock concentrated in Greater Budapest, forming the monitored industrial stock of 2.18M sq m. In terms of demand, industrial projects in the countryside are still strongly driven by the automotive sector, as such suppliers stood behind ca. 40% of all new supply in 2018, while production facilities for other sectors drove ca. 25%. The remaining 35% of the countryside supply was built for distribution and logistics purposes – most leasing demand in Greater Budapest is also tied to such functions, raising its weight in overall countrywide demand. In terms of geographic breakdown, East Hungary remained the most targeted region in 2018 with ca. 50% of all new supply, while Central Hungary received ca. 30% (predominantly in Greater Budapest) and West Hungary ca. 20%. Looking ahead, there is ca. 360,000 sq m of new industrial space under construction across the countryside and if we add the monitored projects in Greater Budapest, the total countrywide under construction volume adds up to ca. 476,000 sq m of space expected to be handed over in 2019. Two-thirds of the total ongoing pipeline is still made up by owner-occupied projects, where the end user builds its own facilities. Developer-led projects are largely concentrated in Greater Budapest, with only a handful of such projects in established countryside industrial hubs, eg. Hatvan, Kecskemét and Székesfehérvár. Kecskemét is looking to become a more significant development hotspot over the next two years, as several developers are planning to exploit their amassed land banks in the area, on the back of the expected supplier influx related to the expanding Mercedes plant. The shortage of available labour on the market is increasingly affecting both supply and demand in the industrial sector. Companies are facing mounting difficulties in finding suitable and sufficient labour pools and as a result, we have seen demand shift towards the eastern parts of the country in recent years. While BMW’s announcement to open a new production plant in Debrecen suggests that there is still sufficient manpower for major new market entries, the brand’s attractiveness is not comparable to that of most industrial or logistics tenants. On the shorter term, the under construction pipeline for 2019 shows a reshuffling of the geographical breakdown, with Central Hungary emerging as the most targeted region for the first time in this cycle, followed by East Hungary and West Hungary in a roughly 50-30-20% ratio.