CBRE RESEARCH

RETAIL
OCCUPIER
SURVEY
HUNGARY
 02

KEY FINDINGS OF THE SURVEY

63% 16% 84%

reported FINANCIAL DIFFICULTIES named online as CORE RETAIL STRATEGY have been offered SOME RELIEF MEASURES

57% 98% 8%
used DIGITAL SALES CHANNELS have held DISCUSSIONS WITH ARE SATISFIED with the measures taken
LANDLORDS

50% 71% 49%

plan to INCREASE THEIR ONLINE received RENT REDUCTION OR ABATEMENT expect the RECOVERY TO TAKE MORE
SALES CAPACITY THAN 12 MONTHS
 03

A LITTLE ABOUT THE METHODOLOGY

CBRE Research conducted a flash survey of retail occupier clients in Hungary in order to find RESPONDENTS' COMPANY PROFILE:
out how the local industry responded to the COVID-19 outbreak. The bilingual survey was
circulated in July-August 2020 and was completed by 50 clients in Hungary.
Fashion and Specialty Retail brands make 61% of all responses. We wanted to dedicate
special attention to these brands who suffered the biggest decline in their business during the FASHION ACCESSORIES ELECTRONICS
economic restrictions. Based on geographical background of the brands surveyed, domestic
brands made half of the sample, brands from Central Europe and Western Europe made 37% 6% 2%
further 24% and 18%, respectively. We interviewed directly operated stores and franchise
partners also. The majority (62%) of our partners in the survey operate a store network with
an average unit size between 50 and 500 sq m .
SPECIALITY OTHER HOUSEHOLD &
RETAIL FURNITURE
AVERAGE UNIT SIZE IN THE SURVEY
24% 6% 2%

31% 20%
50-150 sqm <50 sqm SPECIAL SERVICES &
FOOD LEISURE
8% 4%

14%
31%
150-500 sqm
500-2000 sqm
F&B SPORTS

8% 2%
4%
>2000 sqm
 04

CHANGE IN RETAIL CHANNEL STRATEGIES IN THE SHORT AND LONG TERM

Retailers in Hungary adjusted their sales strategies immediately as a consequence of the COVID-19
pandemic. Due to the general economic restrictions, one in two retailers increased the online sales
capacity and one in four retailers continued to operate fewer stores as an immediate response to the
unfavourable change in the business environment. On the other hand, a certain group of our clients
saw a great opportunity to expand their network and open more stores (12%) and/or to relocate to
better locations (18%). 20% of the retailers, however, did not feel any direct impact of the pandemic on
their sales strategy.
E-commerce will continue to gain (is not going to lose) on its importance in the long-run – as our study
suggests. The share of retailers planning to increase their online sales capacities (57%) and/or reduce
the number of physical stores (45%) is growing looking at their strategy in 2021. We expect busy
months on the retail leasing market as many retailers try to grab the opportunity and relocate to better
spots (37%) in the coming months. It is more likely for retailers to reduce the unit size (12%) than to
increase it (2%) but only 8% feel that the current pandemic and the increasing importance of e-com-
merce is leaving their business without impact in the long run.

IMMEDIATE CHANGES IN RETAIL CHANNEL DUE TO COVID-19 EXPECTED LONG-TERM IMPACTS ON RETAIL CHANNEL DUE TO COVID-19

Increase online sales capacity 49% Increase online sales capacity 57%

Operate fewer stores 27% Operate fewer stores 45%

No impact 20%
Relocate to better location 37%
Relocate to better location 18%
Open more stores 16%
Open more stores 12%
Decrease store size 12%
Decrease store size 10%
Not sure 10%
Not sure 6%
No impact 8%
Increase store size 4%
Open pop-up store 4%
Open pop-up store 2%

0% 10% 20% 30% 40% 50% 60% Increase store size 2%

0% 10% 20% 30% 40% 50% 60%

 05

BIGGEST CHALLENGES FOR THE RETAILERS DURING THE COVID-19 PANDEMIC

RETAILERS' KEY CONCERNS DURING THE PANDEMIC

Not surprisingly, the majority of retailers complained about loss of sales as a conse- 90%
quence of the COVID-19 pandemic and the business restrictions during the lockdown.
80% 86%
This is understandably very similar to the results from other markets. In Hungary, how-
ever, there were more retailers complaining about financial difficulties and disruption 70%
in the supply chain, than in the Czech Republic – where the same survey was carried
60% 63%
out some weeks ago.
50%
Due to the less prevalent epidemic in Hungary, direct crisis management (i.e. handling
infected cases) was less an issue here than in most other markets. Disruption in the 40% 45%
supply chain can have a longer term impact on the retailers’ performance as many face 30%
challenges with sufficient quantity or quality of stock for (in) the upcoming season.
Online is a key strategic element in the sales for most retailers – as we previously saw; 20%
20%
therefore improvement in online capacity is essential to avoid disruption in this channel. 10% 16%
12% 4%
0%
Loss of sales Financial Ensure safety for Disruption in Disruption in Crisis Disruption in
difficulties to customers and supply chain customer service management in online delivery
pay rents and workforce handling capacities
service charge infected cases
 06

ONLINE BECOMES PART OF THE SALES CHANNEL FOR THE MAJORITY

Majority of the retailers surveyed keep their multi-channel platform: 84% of the retailers do not consider
online as their core business strategy, a share declining slightly from 88% in pre-COVID times. Most
brands remain committed to physical retail but the importance of e-commerce shall not be underesti-
mated. 16% of the brands just started to operate this platform only now, while 51% made it clearly part
of their sales strategy. In fact, we can see a slight increase of those who kept online their core business
channel even following the reopening of the stores.
Hungary is among the countries with the lowest e-commerce ratio in Europe; however, we expect this
share to increase more steeply than previously forecasted. In some other markets, COVID-19 did not
make such a shift towards online – mostly because retail was already more digital. In case of Czech
Republic, 80% of the surveyed retailers are already present in the online space and only 5% are “digital
newbies” in the post-reopening world.

IMPORTANCE OF ONLINE IN THE RETAIL SALES CHANNEL

Our core business Newly introduced to

Part of our business but not the primary source of sales Not applicable
compensate for the disruption
to physical stores

12% 57% 14% 16%

BEFORE COVID

16% 51% 16% 16%

POST-REOPENING
 07

DICSUSSIONS WERE INITIATED WITH LANDLORDS

During the lockdown most (many) retailers initiated discussions with their landlords - in most The applied solutions varied widely; however, their ultimate aim was to provide support (relief)
cases successfully. Rental reduction, rental holiday were mostly discussed among other tempo- for the very suppressed cash-flow during the lockdown period. It should be noted that most
rary or permanent solutions. Only 2% of the retailers did not initiate any conversation with the retailers surveyed operate multiple stores and agreed different solutions with each landlord and
landlord and only 10% claimed that there wasn’t any agreement reached with the landlord. shop, depending on changes in turnover levels. This why the numbers exceed 100%.

IMPORTANCE OF ONLINE IN THE RETAIL SALES CHANNEL

71%
Rental
47%
Paying only service
41%
Rental holidays
24%
Paying nothing
reduction charge during the (for existing during the
closure/restriction tenants) closure/restrictions

14%
Change rent
structure to
gross turnover
only

10%
No agreement
on any relief

4%
Burn down
deposit to
pay rents

14% Longer rent-free

periods (for new leases) 4% Fit-out subsides
tenant allowance
 08

AGREED MEASURES WERE NOT SATISFACTORY FOR MANY

Most retailers had discussions with their landlords on the temporary or permanent change of the leasing The ratios are significantly different for the Czech retailers where (:) the government stepped in and
terms. In Hungary only 8% were not offered any relief – compared to 17% in Czech Republic. 84%, offered a supported COVID-rental scheme for the landlords and the retailers. Therefore only 33% of
however, expected landlords to be more accommodating and only 8% claimed to be satisfied with the the retailers expected more relief from the landlords – as opposed to 84% in Hungary.
results of the negotiations.

HUNGARY CZECH
11%
Yes, and we are
satisfied with
these measures

8%
Yes, and we are
satisfied with
these measures

84% 39% 33%

Yes, but we expected Only the COVID- Yes, but we expected
8% No
landlords to be more
accommodating
rental scheme by
the government
landlords to be more
accommodating

17% No
 09

BUSINESS AS USUAL IS STILL A LONG SHOT

Retailers in Hungary and in Czech Republic expect recov- HOW LONG WILL IT TAKE FOR THE BUSINESS ACTIVITY TO RETURN TO LEVELS BEFORE COVID-19?
ery to take longer than suggested based on favourable
retail sales growth figures from the recent months.
HU CZ
Only one in five retailers in Hungary and one in four
retailers in the Czech Republic expects that their business 60%
activity would return to pre-COVID levels already by the
Christmas season this year.
50% 49%

The majority believes it will take more than six months to

recover – Hungarian retailers are even more conservative 40%
39% 36%
and expect a normalization to take place in the second
half of 2021.
30%
31%

20%
18%

8% 13%
10%
5%
0% 2%
0%
Within 1 month 1 to 3 months 3 to 6 months 6 to 12 months More than 12 months
 GOT QUESTION?
FEEL FREE TO CONTACT US!

Anita Csörgő David M Johnston MRICS Gábor Borbély MRICS

Director | Head of Retail Senior Director | Director | Head of Business
Advisory & Transaction Services | Retail Head of Advisory & Transactions Development and Research
+36 70 310 0547 + (36) 30 484 5112 +36 30 547 5870
anita.csorgo@cbre.com david.johnston3@cbre.com gabor.borbely@cbre.com

DISCLAIMER

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or repre-
sentation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material
are reserved and cannot be reproduced without prior written permission of CBRE.

2020