The Hungarian developer Wing is working on planning for a pair of modestly-sized projects in Budapest, but it’s the announcement that planning for Duna Passage has been approved that’s hogging the spotlight. Located just north of the planning battle zone that is Csepel Island, these 250,000 sqm by Wing are actually crucial for the development of the entire district.
Along with direct access to the Danube, a surprising rarity in Budapest, the site will be serviced by the HÉV commuter train along with three road connections (to be built by the investor). Wing is also planning to have the residential and office buildings in Duna Passage BREEAM-certified, and its proximity to the river will be particularly useful in this regard. Water will be piped in to be used for cooling. Construction could begin as early as 2011, but this will depend upon Wing’s equity situation or potentially its ability to cooperate with outside investors on what’s ultimately expected to be a €300m project. Master planning has been executed by Foster & Partners.
The fact that Wing has gone public with its plans for Duna Passage is all the more remarkable, coming as it does before any substantiated hope that the worst of the financial crisis is over.
Instead, given the ominous clouds that have hung over Hungary for the past couple of years, some developers in Budapest have made the understandable decision to hone their asset and property management skills until something like a market returns. In public, they claim to be moving forward gradually on planning, but in private, they admit that the risks simply look too great at the moment.
Noah Steinberg, director of Wing, went into the crisis with a substantial portfolio of property already under his belt but claims his appetite for new projects remains substantial. Besides the mixed-used Duna Passage scheme to the south, he’s also pushing forward with a 12,000 sqm office scheme called V17, and an 8,000 sqm up-market local shopping passage (plus some office space) called Hegyvidek.
Location is crucial to both projects. V17 is next to a metro stop, and is the first building along Vaci ut after West End. Both are strong arguments for commercial success, while Steinberg says the project’s modest size reduces the amount of exposure he’ll have to the capital’s fickle office market.
Hegyvidek, scheduled to open in 2011, is located in a wealthy area of Budapest, and this is guiding the thinking behind the tenant mix. Along with a supermarket, a dry clean, a bank and a pharmacy, a wine shop has been added to the prelease list of tenants which have combined to fill 30 percent of the future space.
Steinberg may give the impression of being more optimistic about the market than other developers, but he’s highly pragmatic when it comes to risk taking. “I don’t think you can do anything in real estate in Central Europe without preleasing,” he says. “The notion of a purely spec development is not very current. What we try to do is to have all the pieces in place, meaning we agree on the bank financing, all the zoning and planning and the work on the rentals, so that when you get to that point, you can start in a hurry.”
He also swats away what he sees as knee-jerk condemnations of Budapest’s office market, which to the casual observer seems riddled by vacancy. “I think vacancy figures are distorted by buildings that are ill-conceived and in bad locations.” But he also has a message for those who keep waiting for signs that the current difficulties are coming to an end. “People always ask when the crisis will be over,” he says. “I think in a way the crisis is over. This is just the new normal, this is the market we’re in. This is what life’s going to be like for a while, so you have to be able to adapt and see if you can create products that work in this market context.”