Rents: Top end of the market remained intact

Although it can be early to call for a trend reversal, rental decline clearly slowed on Andrássy út and has come to a halt in Váci utca. According to CBRE, the top end of the market remained intact with prime rents reaching EUR 80 to EUR 90 per sq m per month for best locations on Váci utca, assuming a ground floor retail unit of 150-180 sq m. with a shop front of minimum 8 meters, even reaching EUR 185 for prime units of 50 sq m. Key money, albeit much less than several years ago is still being paid by tenants seeking to enter this prestigious retail pitch.

In general terms, retail properties have been clearly suffering from the consequences of the economic downturn. On the back of falling retail sales, increased costs and tax burdens, retailers have seen a steady decline in their profits over the last couple of years. Owners could do nothing but go down with rents across the palette of the various retail schemes in Budapest and outside of the capital city. However, lately there is an exception arising to this general rule: Key areas of prime retail high street locations are again attracting new tenants and have lower availability compared to a year ago.

“Pricing is highly sensitive in this market segment depending on frontage, specific location, neighbours, and physical condition of premises.” – explained Anita Csörgő, head of retail at CBRE Budapest. “Although Váci utca is not a long stroll, a retail unit close to Vörösmarty tér have a clearly different price to those at the Southern end of the street, not to mention the side streets. A 150 sq m unit is quite rare; lately we have seen more opening of units between 600-1,000 sq m spread over several floors. Obviously a different pricing is applied for such a large, multi-level store with average rents around EUR 40 per sq m; this giving little guide regarding the pricing of a 150 sq m ground floor prime unit, described above.”

Openings in 2012 have included GEOX, Reserved, Claire’s, KFC and a thriving Turkish restaurant taking the former Nordsee shop unit. It must be noted that such a refurbishment work required by the new tenants can take a long time in case of such protected buildings in the historical downtown. Before starting a renovation, all necessary permits must be obtained and a number of public bodies are involves. Renovations have just begun to the former Csók Gallery at the corner of Váci utca and Pesti Barnabás utca. This property is being transformed into two larger multi-level retail units that should open in spring 2013.