Mall fever returns

Tens of thousands of square meters of new retail space, coupled with the upcoming entry of international fashion retailers, will reshape Budapest’s retail market over the next few years, according to industry experts.

“Hungary is set to see another 112,000 square meters of shopping center space come on the market in 2005 and 2006,” said John McKie, managing director responsible for the retail division at international property consulting firm Cushman & Wakefield Healey & Baker. “If all the planned schemes are completed, this will take Hungarian shopping center supply up to one million square meters.”

Projects in the pipeline include the construction of a retail and office complex at the junction of the M0 and M1 motorways.

“The anchor tenant of the facility will be German discount food retailer Aldi,” said István Petrás, managing director of the developer, Buda Invest Group. “We intend to carry out the project together with an Austrian partner, and expect to sign the cooperation agreement within the next few months.”

The communications department of Hofer KG, the Austrian subsidiary of Aldi, confirmed the information, but gave no further details by the time the BBJ went to press.

“Opposite the Buda Invest site, an Austrian developer intends to build a 100,000 square-meter retail complex,” said Anita Csörgõ, managing director of Colliers International.

Dubbed “MIMO” after its location between the M1 and M0 motorways, the project is scheduled for completion by 2008, added Csörgõ. She declined to disclose the identity of the developer, but said the firm has built three shopping centers in Austria.


Race to build


Developers have also been active in the city’s inner districts. French-owned Bouygues Hungary Kft is undertaking one of the largest developments, the Kerepesi Park project in District 8, which will take the place of the former racecourse.

Local representatives of Bouygues declined to disclose any details of the project by the BBJ’s deadline.

According to market information, the net retail space of the Kerepesi Park will amount to 35,000 square meters. The site will also host a four-star, 250-room hotel, and a 25,000 square-meter office building. As part of the project, the developer will also create public park space running to several tens of thousands of square meters.

The retail and entertainment center will host an Auchan hypermarket and – for the first time in Hungary – an IMAX 3D cinema. The latter was originally slated for the new wing of District 13’s Duna Plaza mall.

Although the Kerepesi project received its building permit six years ago, construction began only last year, and has been advancing slowly. The reason for this is that, due to a legal dispute, Bouygues started developing District 10’s Kincsem Park, the new site of the former Kerepesi racecourse, only after significant delays. Kinscem Park’s new grandstand and stables have now been completed.

As for the facility’s reception by tenants, property consultants have voiced concerns.

“Filling Kerepesi Park with tenants will be a challenge due to the vicinity of the Árkád and Sugár shopping malls on [District 14’s] Örs vezér tér,” said McKie. “However, the facility has Auchan as an anchor tenant, which is promising.”

Meanwhile, expansion of District 9’s Europark is also in the pipeline, said György Arató, legal representative of developer MID-Real Invest Kft.

“The site opposite Europark, on the other side of Határ út, has been purchased by the company. There are several plans for utilizing this area,” Arató said, while declining to reveal details of the project. Gideon E. Loudon, managing director of the company, was unavailable for comment.


Facelifts ahead


Bidding to stay in competition with the new plazas, more and more existing malls will be completely refurbished.

The interior of the Sugár mall has been rebuilt through a billion-forint investment by its owner, the Fotex Group. Requiring a similarly sized investment, the construction of an additional floor, which will accommodate entertainment facilities and restaurants, is also in the pipeline. A number of old tenants – including Libri, Azúr and Match – have rented stores in the revamped Sugár. Some new tenants – including Elektropont, Raiffeisen Bank, CIB Bank and T-Mobile – have recently opened shops in the mall.

The owner is also planning to touch up the building’s exterior.

“Obviously, we want to enhance the exterior of the building, as it can no longer be regarded as aesthetically pleasing,” stated the company’s communications department.

According to Fotex, Árkád and Sugár, though neighbors, are not rivals; rather, they help each other to attract customers.

“These facilities have an excellent location, as this square is the only part of Budapest accessible by five different types of public transport. Sugár has a strategically good location,” claimed Fotex.

Another large-scale renovation project affects Buda’s Skála shopping mall.

“We plan to bring the current edifice down and build a commercial and residential hub on the three-hectare lot,” said Pál Baross, managing director of ING Real Estate Development Kft, the company owning the area in question.

“Right now, [District 11] has no real center. Móricz Zsigmond tér is more a transportation hub. That makes us think a real district center will be popular,” he added.

ING is creating a building complex with combined floor space of 70,000 square meters, 40,000 square meters of which will be used for commercial purposes. The complex will likely be finished by 2008 or 2009.

“Skála, Spar and Kaiser’s have already indicated their intention to stay in the new complex as tenants. In a few months, we will start to look for more tenants,” said Baross.

In another pending project, sources said preparations for construction of the Mammut 3 mall in Buda are underway. However, the communications agency of the Mammut complex’s owner, Mammut Rt, denied imminent plans to build the third phase.

On the other hand, market experts requesting anonymity claimed that construction of the new phase could begin in two years.

Last year, Sándor S. Nagy, co-owner and CEO of Mammut Rt, told the BBJ that negotiations about purchasing the state-owned site next to Mammut 2 were underway. At that time, he said the expansion of Mammut had been on the agenda for a long time.


Heart of the city


Real estate gurus also expect the downtown Pest shopping area to expand in future.

“The shopping area will soon outgrow the immediate neighborhood of Váci utca and Deák tér. It will expand onto Andrássy út, where rents are 50% cheaper than Váci utca. This will lure some of the tenants of Váci utca to Andrássy út,” said Csörgõ at Colliers.

The expansion will be partly fuelled by the insistence of several large fashion retailers to open flagship stores in a downtown location before opening shops in malls, she added.

According to Baross, expansion of the downtown area will also be facilitated by the munici­pality’s “town hall” project. This scheme aims to create a new quarter behind the town hall, on a presently unused area.

“The project has been dragging on for years, but as I see it, the Budapest Municipality will finally call a development tender this year. The site is in a prime location, so we also intend to participate in the tender,” said Baross.

ING is already present downtown as a developer, transforming a former office building on Vörösmarty tér into a shopping mall. Swedish clothing retailer Hennes & Mauritz has already rented 2,800 square meters in the facility.

Market sources said fashion retailer New Yorker will also open a 2,000 square-meter store in the building, which is scheduled for completion by the end of 2005.

Source: BBJ



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