A Record Year for Industrial and Logistics Properties

The Hungarian industrial and logistics real estate market closed a record year in 2022 in terms of rental volumes, new developments and investments in the countryside, the Hungarian Association of Logistics Service Centers (MLSZKSZ) said in a statement.

According to their information, last year 482,000 square meters of new industrial and logistics real estate developed for rental were handed over in the country, 30% of which in rural areas. The total stock of industrial and logistics properties developed for rental in Hungary since 2005 now exceeds 4.5 million square meters, of which 1.4 million are in rural areas.

The statement quoted Milla Kalmár, senior consultant at international real estate consultancy 108 Agency Ltd., as saying that the growth was mainly influenced by international trends. To ensure smooth production and service to customers, companies are storing 20-30% more goods locally than before the pandemic, which requires significantly more warehouse space, she said.

The industrial and logistics real estate market in this country has also been pulled by foreign direct investment. “A typical trend is for Western companies to bring back to Europe sites previously relocated to Asia or simply to bring their manufacturing capacity closer to their target markets. One of the biggest winners in this process in Europe is Hungary," she pointed out.

Last year, foreign direct investment in Hungary reached EUR 6,493 million. South Korea is the top investor, followed by Germany among Western European countries. In the last five years, more than half of the investments were related to battery production.

Milla Kalmár expects further market growth this year due to international trends and ongoing investments. Currently, 380,000 square meters of industrial and logistics real estate for rent have been developed in Budapest and 130,000 square meters in rural areas.

Energy efficiency investments are increasing due to the rise in energy prices, and tenants are more willing to choose such properties. Many of these developments use a range of green solutions – insulation, heat pumps, solar panels –, which are driving up construction costs and, already this year, record high rents.

Despite rising rents, the national vacancy rate is only 4%, with virtually no immediately available vacant space of more than 5,000 square meters available for rent in the Budapest area and hardly any in the countryside. Pre-lease rates are also high, with speculative developments leading to half of all leases in the capital and the agglomeration being pre-let, and 75% in rural areas.