– How does the real estate market look back to the beginning of the plate era?

– The first Hungarian shopping and entertaining center, Duna Plaza has just become a teenager. Since then nearly one million square meters of shopping center has been or is being built i.e. supply is expanding by 250-300 square meters per day on average. Sales were a very difficult job in the beginning; for example in case of Duna Plaza retail space could hardly be leased for EUR 5 at today’s exchange rate. When Pólus Center opened shortly after that the success of the pioneering work was signed by the fact that the new shopping center could be filled with tenants with much less effort.

– Who and why have become the most successful participants of the plaza market?

– The three most successful examples are obviously Westend, Mammut and Árkád. Te example of Mammut and Westend highlights a Hungarian characteristic: entertainment has a very important role in addition to shopping influencing the development of a new lifestyle. Having developed over 80 shopping centers across Europe, ECE operating Árkád shopping center however strictly represents the concept of building well designed shopping centers clearly specialized for shopping and services by selecting quality service providers and brands.

– How and to what extend may the plaza market expand?

By the conversion of Újbuda City Center being built on the site of Skála in Buda the era of generation four plazas has started. According to the data from 2007 there was over 300 thousand square meters of shopping center space was under development in Hungary of which Aréna Pláza of 64.000 square meters was handed over in November last year. Developments are under progress in Nyíregyháza, Debrecen and Szombathely at the moment however we are still behind the European average both in terms of total floor space and the shopping center floor space per thousand capita. On the basis of the floor space of the new units to be completed this and next year including expansions of existing ones Russia stands on first place among European countries followed by Poland and Italy. Approximately 1.5 million square meters of new space will be handed over in Russia.
Looking at trends in Hungary after the era of developments in the capital developers leave for the country and as the market of towns with populations of 50-60 thousand is getting saturated supply moves on to towns with populations of 20-30 thousand people. While 60.2 percent of all classic shopping centers and commercial parks are located in Budapest, only one new shopping center (64.000 m2) has been handed over in Budapest out of the 220 thousand square meters of new development completed by the end of 2007 while the rest (156.000m2) was built in the country.
To continue the heroic age mainly the Plaza Centers Corporation has opened shopping centers of 8-15 thousand square meters average floor space at the county capitals. After 6-7 years of operation unfortunately there were a number of cases where (e.g.: in Szombathely) fundamental problems of design, concept and operation have turned out leading to the recession of the turnover and conditions of the plazas. Positive examples to be mentioned though are in Pécs, Gyõr and Kecskemét.
As an other new trend a number of motor-plaza centers have been or are being opened in Hungary. Following Székesfehérvár and Pécs, the first section of the development n Soroksári Road was completed in November 2006, Európa Autópláza being built next to motorway M3 intends to join the motor-plaza type of sales competition too.
The market of strip malls (Stop.Shop. or a Buy-Way type of stores) gathered pace from 2005 together with the market of big boxes built for standalone brands (e.g.: IKEA).

– Budapest has a very serious middle-term city development program to revitalize downtown retail activity. How much are ongoing market processes in line with the objectives of the city development program?

The revitalization of department stores (e.g. Skála) allowing for more traditional shopping for quality conscious middle aged consumers is interestingly experienced as a demand- Surveys show however that many brands or stores refrain from entering Hungary because they have not had an opportunity to open premises meeting the space requirements and quality standards of their brand. Váci Street, Andrássy Road, Divatcsarnok, Palazzo Dorottya project in Dorottya Street, the vicinity of the Opera, revitalization of Deák Ferenc Street all sign that the traditional pedestrian and shopping streets are renewed too.
A trend experienced for about three or four years is that retailers who had moved in to plazas in the past are now showing greater willingness towards downtown Budapest offering more ideal locations in terms of advertising value, size of premises and turnover to open a flagship store. If we consider that the average store size in different plazas today is between 100 and 350 square meters – which presently may be said the largest in Mammut 2 – and that in the most frequented shopping center WestEnd there are “only” 70 thousand visitors per day on average the expectations and interest of international brands towards the downtown is understandable. In case of an international brand entering the market and opening a new flagship store we see them typically choosing premises of 1-3 thousand square meters (e.g.: New Yorker opened a 2.000 square meters, while H&M opened a 3.000 square meters floor space representative downtown store lately)
To conclude there are two processes going on parallel on the market: we can see the still dynamic plaza development programs and additionally the revitalization of downtown has started as well. However there are numerous questions in both processes. What will happen to the ageing, lower quality plazas in 10 years time? What survival chances, rents, and economic indexes will they have? Will there be opportunities to open new shopping center developments at the right places in the right time? Can areas out of the already marketable downtown locations be revitalized like Kossuth Lajos Street, Rákóczi Road, or parts of the Great Boulevard away from the busiest junctions? These locations may hardly be marketed for half of the rents of premises in an average plaza.

– How does the business strategy of international players, chain stores and brands influence the growth of the present real estate market?

– On the retail market we experience the period of growth from a number of aspects: supply is expanding not only in shopping centers, department stores and strip-malls but a trend of growing shop sizes is also seen at expensive and cheap locations as well. There are several reasons for the multiplication of more and more spectacular mega-stores. In shops expanded like market halls customers are virtually flushed by the abundance of goods.
In terms of retail the expansion of international companies is obvious the business strategy of which is determined by international standards in many vases thus they have to adapt to that in the selection and design of stores. Due to that it is more difficult for them to select business premises; in order to meet the standards characteristic for the brand they are often forced to open spaces next to or behind each other into one space.

The growing range of products and the demand for representation also requires space. The expansion of floor space with sable background and good business policy – and possibly with a bit of luck – may be the key to success. Many famous chains have produced better efficiency in shops of over a thousand square meters than in shops of a few hundred square meters i.e. they managed to increase specific turnover. Representative downtown stores having advertising value prove to be effective messages towards competitors and the market as well; the size of premises often represents the role of a company on the market.

Tenants of larger retail spaces have stronger positions in negotiations thus achieving lower rents. Expansion of floor space in itself may not be considered as the key to success; to fast expansion may lead to goods supply or infrastructural difficulties which may result in converse effects.

A further reason for the expansion of retail premises is that shopping courts following western trends are more and more common. The characteristics of the shopping centers operating under the name “strip mall” is that the one-level stores built on cheaper sites, along busy roads on the edge of town provide tenants with large floor spaces for low rents. So there is more and more expanding space around consumers either in luxury or “wallet-friendly” shops.

– How do you see the position of tenants?

– Let me draw light to two or three aspects. Tenants of larger premises always have a stronger position thus they have a good chance to achieve lower rents. On the other hand the expansion of supply, the location and timing may also be decisive factors. If a shopping center is opened at an attractive, introduced location (e.g.: the one on the site of Budai Skála will be like that), then the lessor is in a good position. In case of Lurdy Ház or Duna Plaza the tenants are in strong bargaining position. When Pécs Árkád was opened the contracts of tenancies were just about to expire in competing Pécs Plaza. Lessors were forced to reduce rents by 30-50 % here in order to keep their tenants. Finally let me mention Aréna Plaza that was opened six years after the opening of Árkád last fall and is a good example representing how important a factor the proper tenant mix is in terms of the level of rents.

– Going back to the basic question: One decade after the opening of the first plaza can downtown Budapest or other large towns in the country be revitalized in terms of commerce?

– Looking over the market situation we can see that the development of the plaza market and the downtowns run parallel to each other. If we have a look at the increase of demanding consumers we can say that the downtown may be a strong competitor in the future not only in terms of catering but in commerce as well. Livable cities and good life quality are our common interest.