Right at the beginning, it is worth emphasizing that this is not 2008, that is, we cannot talk about a fresh start, but a transformation. In the commercial real estate market, the emphasis is shifting, they are not realized in new developments at all costs, but on the rethinking and modernization of the existing building stock, including hotel investments. Quantity will be replaced by quality, after a year of preparation, the recovery will come, since there is hardly any room to go down.
Although it is not entirely clear even for market participants whether the stagnation will continue this year, we can also call it stability or we are already on the way up. In any case, in the survey of the Royal Institution of Chartered Surveyors (RICS) in July, almost two-thirds of the surveyed market professionals put the cyclical position of the market at the bottom, while another 19 percent already entered the recovery phase.
Half a year has passed since then: according to hopes, there will be a positive shift in the Russo-Ukrainian war along with its effects on energy procurement, and in the wake of the Draghi report, perhaps they will focus on increasing competitiveness in the European Union as well, instead of being lost in the pits of the administration and showing less innovative performance. – they would talk about curves.
Energy diversification is even more difficult for us as a landlocked state. Although the share of renewable energy is increasing, it is obviously not able to supply the gigantic industrial capacity installed in our country – for example, investments in the automotive industry. In the same way, the dead-end solutions of German car manufacturing and industry do not have a good effect on the Hungarian economy, and through this on the GDP.
What happened to the office buildings and shopping malls?
Office buildings have always been the focus of the commercial real estate sector as the most significant asset type. Here, the vacancy rate increased continuously, the vacancy rate of office buildings reached 14 percent in Budapest at the end of the third quarter. The hybrid work schedule didn’t help the process either, so buildings want to be competitive with new services, including strengthening the coworking function, while digitized and energy-efficient building management systems are also indispensable.
The Magyar Nemzeti Bank (MNB) released its second-quarter commercial real estate market analysis in October last year, in which it saw that, in addition to the demand levels seen in the first half of the year and the volume of newly planned areas to be handed over, there is a risk of oversupply. In any case, a significant amount arrived on the market last year as well, and a significant part of the new volume to be handed over this year is already leased. In other words, despite all the difficulties, the defining segment of the commercial sector is the office market.
For a long time, retail trade has not been driven forward by the big development boom, but rather by serving changing consumer needs and trends. Retail is slowly recovering from the shock caused by the previous food inflation, although we cannot yet talk about the previous outstanding data.
Returning to the MNB’s analysis, in line with the improving trend of consumer confidence, the segment’s underutilization indicators also improved both in the countryside and in the capital’s shopping centers. In small and large retail centers, they are focusing on developing the tenant mix, e-chargers are appearing in more and more places, and other additional convenience functions are being installed.
Those who bring their form
The hotel industry now leads the real estate market, which is also due to expanding tourism and the growing number of guests. According to the KSH, in January-November 2024, compared to the same period of the previous year, a total of 41.3 million guest nights were registered at tourist accommodations by 5.6 percent. A significant amount of new development is underway, new brands are arriving in Budapest, and the five-star luxury segment is also getting stronger, meaning that in addition to mass tourism, other target groups are coming to the Hungarian capital. Moreover, there are also plans that would give outdated office buildings a hotel function, of course this is only possible in a good location after a comprehensive renovation program.
The industrial-logistics real estate market has also been a winner in recent years, especially since the pandemic, the segment’s role in Hungary has grown parallel to the rise of e-commerce. Also, the strong industrialization policy of the last decade had a beneficial effect on the sector, where, in addition to speculative developments, self-owned constructions also came to the fore.
According to the Consultative Forum of Budapest Real Estate Consultants (BIEF), in the third quarter of last year, the stock increased by approximately 155,000 m2 nationwide, and the vacancy rate remained below 8.7 percent, which is also a much more favorable figure than we can see for office buildings. Sustainable solutions, such as solar panels, heat pumps, and green certifications, are playing an increasingly important role in logistics parks, and employee well-being is also appearing in the halls, and robotics and digitalization are taking the segment to another dimension.
Is it new construction? There is a problem with him!
The housing market was characterized by a duality, since while we could measure a double-digit price increase in the second-hand housing market and a growing transaction turnover with approximately 120,000 sales and purchases, the number of new housing constructions fell. According to KSH data, 8,709 new apartments were built in 2024 I–III. quarter, which is 19 percent less than a year earlier, but the number of building permits increased, which means there is hope. The flickering housing constructions also put the construction industry in a difficult situation, since the capacities are not sufficiently utilized, which may even lead to the emigration of skilled labor over time.
It was not by chance that the Government sounded the alarm and announced housing market measures related to the New Economic Action Plan, which also outline a renewed housing policy. In order to do this, Within the framework of the Housing Capital Program, real estate funds can receive support of around HUF 200 billionduring which they will predominantly build apartments, moreover, social aspects will also appear, that is, the concept of the magical “affordable apartment” may come to the fore.
What about investments?
The investment turnover fell compared to the previous year, especially from foreign investors, the background of which is higher financing costs and economic risks. The revival of the market and the improvement of yields can only be expected in the longer term, which industry players are also trying to encourage with sustainable developments and strategies adapted to consumer expectations. According to CBRE’s forecast, approximately 400 million euros of transactions could be realized in 2024, which may slightly surpass the year 2023, while this year this figure may even double.
Despite the changing economic environment, the domestic investment market offers stable opportunities, while of course there are differences between the individual asset classes. Thus, for example, since the beginning of the epidemic, the value of industrial real estate has risen significantly, which in Hungary has appreciated by about 25 percent in euros. In addition to office buildings and logistics facilities, it is worth diversifying, i.e. investing in retail units, hotels or even student hostels and energy-producing buildings.
Source: www.economx.hu
