Hungary

Hungary is one of the oldest European countries, situated in the middle of the continent in Central Europe. It is a gateway to Eastern Europe and the Balkan countries. The early adoption of a free market economy in the early 1990s meant that it became an attractive destination for foreign investment early on and the retail sector saw many fundamental changes to arrive today at a modern retail infrastructure. The capital, Budapest accounts for a fifth of the country’s ca. 10 million population.

The country is comprised of 19 counties, each of which has a smaller city within it which is home to the local government administration office. These smaller cities around the country are also of interest to foreign retailers.

While the shopping centre pipeline is limited at present in Budapest, retailers have excellent opportunities in existing, well operating shopping centres. The shopping streets are further developing with new retailers, and this continuously improves the quality and supply of the city’s downtown area.

 

ECONOMIC SUMMARY
ECONOMIC INDICATORS20152016F2017F2018F2019F
GDP growth2.62.12.22.83.0
Private Consumption Growth 2.62.42.01.81.9
Industrial production 7.13.23.34.95.1
Investment -0.3-2.01.53.13.5
Unemployment rate (%) 6.66.26.56.66.4
Inflation-0.11.02.02.83.0
HUF/€ (average)309.9313.5313.1306.0303.1
HUF/US$ (average)279.3292.6294.2280.9271.1
Interest rates Short Term (%) 1.61.451.41.42.1
Interest rates 10-year (%) 3.43.53.63.63.9

NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc

ECONOMIC BREAKDOWN
Population 9.8 million (2015)
GDPUS$ 120.6 billion (2015)
Public sector balance -2.0% of GDP (2015)
Public sector debt75.3% of GDP (2015)
Current account balance4.2% of GDP (2015)
Parliament Majority government (Fidesz and Christian Democratic People's Party)
PresidentJános Áder
Prime Minister Viktor Orbán
Election dates2017 (Presidential) 2018 (Parliamentary)
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
20152016F2017F2018F2019F
Retail Volume5.63.32.92.52.3
Retail Value3.67.55.95.24.8

Source: Oxford Economics Ltd. and Consensus Economics Inc

LARGEST CITIES (2001)
CITYPOPULATION
Budapest1,700,000
Debrecen204,000
Szeged161,000
Miskolc163,000
Pécs146,000
Gyor129,000
Nyíregyháza118,000

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Budapest: 47.498406, 19.040758
Debrecen: 47.529974, 21.639357
Szeged: 46.253617, 20.146135
Miskolc: 48.104385, 20.791356
Pécs: 46.071299, 18.233187
Győr: 47.684051, 17.635101
Nyíregyháza: 47.953258, 21.726465

MAJOR DOMESTIC FOOD RETAILERS

CBA, Coop, Reál Élelmiszer

 MAJOR INTERNATIONAL FOOD RETAILERS

Tesco, Auchan, Spar, Aldi, Lidl, Penny

 MAJOR DOMESTIC non-FOOD RETAILERS

Retro, Heavy Tools, Libri, Playersroom, Roland, Kristóf, Dockyard Island, Pirex, 576 kbyte, Kreatív Hobby, Brendon, Regio Toys

 INTERNATIONAL RETAILERS

Inditex Group (Zara, Bershka, Pull & Bear, Stradivarius, Massimo Dutti, Oysho, Zara Home), GAP, Desigual, LPP Group (Reserved, Mohito), Mango, C&A, H&M, Marks & Spencer, New Yorker, Van Graaf, Peek & Cloppenburg, M&S, Promod, Orsay, Tally Weijl, TAKKO, Charles Vögele, Deichmann, CCC Shoes, Humanic, Reno, Salamander, Müller drogerie, DM, Douglas, Rossmann, Media Markt, Intersport, Decathlon, Sports Direct, Euronics, IKEA, KIKA

Food & Beverage Operators

McDonald’s, Burger King, KFC, Nordsee, Pizza Forte, Starbucks, Costa Coffee, Coffeeshop Company, Vapiano, TGIF, Leroy, Hard Rock Café, Subway

TYPICAL HOURS
MONDAY - FRIDAYSATURDAYSUNDAY
10.00-21.0010.00-21.0010.00-18.00

High street retail has improved significantly over the last 5-10 years in Hungary and now offers different locations for medium, high-end and luxury retailers. However there is high street retail in Hungary, particularly in Budapest, shopping centers are the main shopping destinations.

There is a total existing stock of shopping center (sized over 5,000 sqm) space in Hungary of over 1.4 million sqm GLA as at June 2016. Shopping Centre developments dominate the retail market, and are the main target destinations for most expanding international retailers.

Retail parks and strip malls (usually 5-10,000 sqm), typically targeting local residential areas, are also very popular in Hungary. Retailers such as IKEA, Möbelix, Praktiker, OBI, Tesco, Metro, Decathlon and Auchan are present on the market.

The factory outlet market is concentrated on just two major schemes in Hungary; Premier Outlets Center near Budapest and M3 Outlet Center close to Polgár, offering ca. 30,000 sqm of GLA.

Expansion by retailers to the Hungarian market is usually direct, or via franchise or joint-venture partners, but in the past 5-10 years retailers have mostly expanded directly.

There are no restrictions on foreign companies either buying or renting real estate in Hungary, except land. It is generally believed that the Hungarian leasing legislation is more orientated towards landlords than tenants, however it is in favor of tenants that leases have become shorter with break options.

Typical leases in Hungary are signed for fix period of time including indexation and no options at the final expiry date of the leases.

Although it is possible to occupy a new building within a few weeks, it is more realistic to expect that on average it will take 6-9 months from initiating the property search to taking occupation of an existing property. This includes time for considering location options, the identification of buildings or sites, negotiating leasehold terms and drafting of the appropriate legal documentation.


TOP SHOPPING CENTERS BY SIZE
NAMECITYSIZE (GLA SQM)YEAR OPENED
Arena PlazaBudapest65 0002007
Árkád BudapestBudapest64 0002002, Ext. 2013
KÖKI TerminalBudapest55 0002011
WestEnd City CenterBudapest48 0001999
AlleeBudapest46 5002009
Mammut I-II.Budapest44 4001998/2001
Corvin Shopping CenterBudapest34 6002010
MoM ParkBudapest31 0002001
Pólus CenterBudapest48 7001996
CamponaBudapest40 0001999

New Entrants to the Market

GAP Ralph LaurenDesigualParfoisBobbi Brown
Michael KorsMohitoLegoPylones
Breitling GAPZara HomeSkechers

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsGenerally 5 or 10 years, often with tenant extension right for further five years. In the past few years, tenant’s break options are more often built within the leases, and if applied are typically required by tenants in the 3rd-5th years of the lease.
Rental PaymentUsually based on an agreed EUR rate/sq.m/ month and payable quarterly or monthly in advance. Payment is usually in HUF based on the exchange rate at an agreed date (usually the date of invoicing). Turnover rents with a minimum base are now getting common; percentage of turnover varies between 5-12%.
Rent ReviewRent and service charge rates are usually increased annually in line with the increase in the Euro zone inflation rate as measured by an appropriate index.
Service Charges, Repairs and Insurance Service Charge is usually payable in multi-tenanted buildings/projects and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance and insurance, servicing of elevators, air conditioning, management fees and property taxes. Service charges are usually paid monthly or quarterly in advance. It excludes internal maintenance and insurance of rented accommodation, utility charges and VAT. The landlord is responsible for external /structural matters in shopping centers (charged back via service charge) or tenant (except in multi-let buildings). The tenant is responsible for internal matters. The landlord usually insures the main structure and external fabric but will charge this back to the tenant through the service charge. Insurance for common parts is also paid by the landlord and charged back. The tenant usually pays for internal insurance directly.
Property Taxes and other costs Currently there is no central property tax legislation, it is determined on local municipality levels controlled by Act C of 1990 on Local Taxes, which maximises the volume of taxing and other exemptions.
Disposal of a LeaseSub-letting is usually possible under the terms of the lease, subject to landlord’s prior written approval. Assignment rights are not normally barred in the lease but will also be subject to consent – which should not be unreasonably withheld. Early termination is only by break clause – to be negotiated at outset of lease by mutual consent upon negotiation. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear.
Valuation MethodsZoning methods rarely used. Standards vary, with some landlords using GIF (retail), some BOMA, otherwise it tends to be Gross Internal Area, excluding vertical circulation. Most will include an “add factor” to allow for a proportion of common areas.
LegislationLeases must be in writing and the lease document forms the standard documentation required.


Hungary Contacts

VIKTORIA SZABO

Partner, Head of Retail Services
Cushman and Wakefield Kft.
15 Deák Ferenc utca
Budapest H-1052
Tel: +36 1 268 1288
Mob: +36 30 2448 237