The View 9

44

LACK OF SUPPLY LIMITS RETAILERS’ DEMAND In the case of new retailer entries, CBRE registered 11 brandswho entered theHungarian retail market during 2019, a measurable slowdown from the preceding year’s figure (15). The group of newcomers was dominated by fashion retailers who accounted for one third of the new store openings, while the remaining part was split among various categories. Besides, we have seen two significant market exits last year, both due to regional circumstance: KIKA was purchased by a direct competitor Mömax who will merge the chain into its network, while Vögele terminated all activities in Europe despite numerous attempts to remain viable. All the 17 stores across the country were quickly re-let to fashion, home furnishings and multichannel retailers. Shopping centres found it hard to secure new tenants throughout 2019, partially due to the very limited available space and partially because of the reduced interest of new brands expanding into the country. Budapest high-street market saw moderate demand and strong fluctuation throughout 2019, mainly existing tenants’ movements driving the market. Interestingly, the larger fashion and footwear chains remain untouched and keep representing the backbone of the high-street scene in downtown Budapest. On the other hand, smaller format fashion retailers

(under 300 sq m) are being slowly replaced by more tourist focused brands, reacting to the sustained tourism boom concentrating in the city centre. There has been a major increase in higher quality souvenir shops as well as upscale F&B establishments in this area. Generally, fashion brands manage to generate higher turnover in shopping centres as their selection is positioned to meet local customers’ requirements. Based on our Shopping Centre Index, the F&B and Household & Furniture sectors are increasing in the average retail mix of shopping centres in the capital. These retail categories expanded most dynamically by opening new units or expanding in size over 2019. At the other end of the spectrum, the footprint of Fashion & Accessories shrunk on an annual basis. The F&B and Household & Furniture categories also stand out if we look at rental evolution or turnover trends – these retailers not only increased their share in overall GLA but contributed more significantly to the revenue of the average shopping centre. Following some rationalization of their physical footprint, unitary turnover figures and rental rates per sq m generally improved for Fashion & Accessories as well. Categories with lower exposure to e-commerce can be considerably more cost- resistant and comply with potentially higher rental expectations of the landlords.

Historic E-commerce Growth and Forecast

Source: Euromonitor, CBRE Research