With the industrial space in Debrecen running out, where will the BMW suppliers go? | G7
“I’m going very carefully, I’ve already had three tires blown out on this road,” says István Herdon, the owner and CEO of the Xanga group. At the beginning of October, the road, which was still in a very rough condition – where, in the shadow of the 30 road signs exposed due to the work, the police are fined for speeding motorists one by one – according to the plans, the renovation and widening works will be completed by the end of the year, so it will be easier to drive here next year as well .
Not sure for long though. In three years, such an explosive change will take place in Debrecen that it is difficult to even imagine today. In fact, in 2025-26, the BMW plant that is currently under construction, the suppliers that will settle here, as well as the Chinese CATL battery factory in the southern industrial zone, a herd of cows are currently grazing in its future area, while an archaeological excavation is currently underway in another corner is taking place
CATL’s EUR 7.3 billion investment is by far the largest in Hungary’s history, and in addition to the company’s territory, it will also build on companies such as the cathode manufacturer EcoPro and the battery selection film manufacturer Semcorp – these are huge investments in themselves. Of course, BMW will also need many suppliers, and the overall result of all this is that, according to István Herdon, there will be 75,000 new jobs in the city of 200,000 and in the surrounding industrial areas in a few years.
This is favorable for all businesses in the city, of course also for the Xanga group, which primarily deals with industrial real estate development, surprisingly, however, this did not always seem certain to István Herdon, in fact. A couple of years ago, it seemed to the developer active since the turn of the millennium in the self-owned Határ út industrial park – officially known as the Debrecen Regional and Innovation Science and Technology Park – that he would stay on home turf. Xanga develops the industrial areas on its own, buys the given area with the equity capital of bank loans, where it develops the road and utility network, and builds the halls that the industrial or logistics companies that are interested in the force rent on a long-term basis. (Although in the past there were also examples of the completed property being purchased.)
In connection with the arrival of BMW, an industrial development program worth hundreds of billions was launched, which made it seem that Xanga would not be able to compete. The rent of the industrial halls built on plots created from their own resources naturally reflects the investment and the return expectation of Xanga, they can only develop the infrastructure step by step. This difference is well symbolized by the wild new four-lane roads surrounding the BMW site, at the intersection of which there is also a three-lane roundabout – in sharp contrast to the aforementioned state of Kishegyesi út, which also leads to the industrial park on Határ út.
“Here I pulled down the blinds in my mind, because I thought that we could not develop at such a speed, that private industrial infrastructure development would no longer make sense,” recalls the businessman.
it seemed that the 600-hectare (later expanded to 710) area of the southern industrial park would be enough for all industrial companies moving to Debrecen for the next 20 years. However, with the arrival of CATL and other companies serving the value chain of battery production, the situation has changed radically. At the moment, it is already there that part of BMW’s supplier circle is not even in Debrecen, and then down, and that is because the labor supply is doubtful, but also because of the lack of space.
In addition to the already designated industrial areas, the city does not want to create new ones so that Debrecen does not become unilaterally over-industrialized. As mayor László Papp said in an interview, “we can display the Full board”.
Debrecen has 1,500 hectares of industrial land, and as I saw in a presentation, the only city in Europe with such an industrial background has a Champions League-winning soccer team. The industry is already performing, now it’s football’s turn! That is the more difficult development project
István Herdon notes.
In all seriousness, this situation increases the value of local areas. For this reason, there are plenty of applicants at Xanga, and during negotiations it is worth considering how close each supplier needs to be to BMW. Since there are companies already in the Határ út park that plan to expand continuously, István Herdon calculates that he can “set up” a BMW supplier in the seven-hectare open area of the area already built there. a 25-hectare part of the park that is still under construction is being prepared, which is currently still arable land, two or three more suppliers may arrive here. The significant advantage of this is that it falls within the narrowest circle of suppliers around the BMW factory based on distance.
gift Xanga has not been left out of the southern industrial park either, where it is developing on an area of 20 hectares, within which the first phase of a 30,000 square meter project, the construction of a 10,000 square meter hall, is already underway. It will be used by a Chinese company operating in Hungary under the name of Halms Hungary, which produces batteries for electric cars, among others for Volvo and Tesla. At the moment, Halms supplies its European markets with high logistics costs from other factories, but it wants to do this from Debrecen as soon as possible, so the construction is taking place with a very tight deadline. According to the plans, the company will take possession of the hall towards the end of the year and can start installing the technology.
As István Herdon says, one of their competitive advantages was shown here, that they often anticipate the needs and start project preparation, often concrete developments. They not only develop the basic infrastructure (this is not their task in the southern industrial park, but it is in Határ úti), but also plan, permit and build the hall in a kind of standard multifunctional design even before the future tenant is known. (In the industry, this is called speculative development.) Of course, it happens that the future user arrives earlier, as in this case Halms, so he can buy the demand during construction. But it is also an example of the fact that due to special requirements, already prepared and approved plans have to be discarded or redesigned.
Another advantage of Xanga is that they like it for free if a company doesn’t buy the completed hall, but rents it out for the long term, since this way the yield can be predicted for up to 20 years. This is now meeting the market needs, in addition to Halms, the future BMW suppliers applying to Xanga also want to rent without exception.
In the current economic environment, we are facing an extremely exciting period, as they say, the world of easy funding and cheap money is over
István Herdon notes.
In recent years, in addition to Debrecen, Xanga has also started development in Nyíregyháza and Miskolc, in cooperation with the universities and municipalities there, linked to industrial development strategies. Due to the lack of land in Debrecen, it is conceivable that Xanga could also benefit from the establishment of BMW suppliers in Nyíregyháza and Miskolc, since they also fall within the widest circle of 100 kilometers and have a separate labor market from Debrecen. The first hall of Xanga will soon be handed over in Miskolc, and according to István Herdon, it is increasingly likely that a big one will move in, rather than several small ones.
Xanga’s presence in Nyíregyháza and Miskolc fits into a kind of diversification strategy that the CEO began to develop when the future of private industrial development in Debrecen was called into question. Since then, several Hungarian and international projects are under preparation. But they have set foot outside the industry as well, Startup Campus Incubator Zrt., which is partly connected to the group, is “very active and runs various programs”, and Xanga has opened offices for startups in Debrecen, Budapest and Cluj. The change in the financing environment is having its effect here as well, it is more difficult to find co-investors today than it was a year or two ago. Not for that reason, but they have recently oversold several startup investments that have become more mature.
The foreign scope of diversification does not only cover Romania and Cluj, although preparations are still underway in the United States, where they are looking for incubator projects in a university environment. For the first time, they will not be able to fly here from Debrecen for a long time, but the chances are better towards China. Deputy Foreign Minister Levente Magyar recently spoke about the start of preparatory negotiations in this regard. The developed international environment and the tasks to be solved by air transport project a huge development for the Debrecen airport until 2030, he added.
During the speech, he said that the first Wizz Air plane took off from Debrecen ten years ago, which was the first scheduled flight after a long time, previously larger planes only operated as charters. At that time, i.e. in 2012, István Herdon’s company group operates the airport and launched the first scheduled Wizz Air flight. The operating company gave the majority ownership to the city six years later, and this year it was transferred to the state.
As before, the “committed developer” of the Debrecen airport is Xan, as a minority owner, since the magnitude of the investment required for further development exceeds the capital strength of the company group. In addition to the remaining minority, it has significant developments in the airport logistics park. our article The hangar, which enables the servicing of aircraft of various sizes, including the Airbus A321, has been fully completed since 2015, and is currently awaiting the approval of the specialist authorities. The simulator next to the hall is planned to be expanded with a unit on which airport firefighters can also receive training and certification for wide-body machines.
From the outside, an office building will also be completed at the airport, and the road from here will also lead past the planned hotel, which will be just opposite the future terminal, as can be seen at the Budapest airport. True, the road was still missing the top layer of asphalt.
We can almost seem funny with our piecemeal constructions, but self-funded development processes are like that, we are progressing, but of course along a vision. We are sitting in two separate cafes
– refers to large-scale industrial area developments.
When I asked him to smile a little in the photo, standing in front of the office building, he remarked that there was nothing to be happy about now, it would be a recession picture. Of course, he doesn’t have a magic bullet either, but Xang has less to worry about, since the vast majority of his income comes from long-term rental contracts that are indexed to Eurozone inflation. According to him, their group of mostly internationally owned tenants will be able to handle the rise in energy prices, which Xanga is also reacting to by the way – solar panels and heat are a basic part of all of their new investments. “The green revolution has happened!” says the businessman.
By the way, there is also a branch of diversification that seems quite strange at first glance: Xanga is the real estate partner of the new Burger King in Debrecen. The interesting thing about the development is that this is the chain’s first-floor drive-in restaurant, so they had to work out and coordinate with the American headquarters the corresponding modification of the franchise book, which is essential for operation. István Herdon strongly believes in the restaurant’s success, and as he says, so far the business plans have been met with plenty of traffic. And the many tens of thousands of new workers have not yet arrived in Debrecen.
The publication of this article was supported by the Xanga Group.