The pandemic has transformed the local real estate sector with strong investor interest in the logistics sector, while retail and hospitality real estate has taken a back seat in the past year. Despite the effects of the COVID-19 pandemic, office buildings have proven to be the most popular investment asset according to Real Estate Intelligence Report 2022, seventh edition in the series, where DLA Piper Hungary experts provide insight into the prevailing legal practices in the Hungarian real estate market and Provides an indication of the current balance of power between sellers and buyers.
According to DLA Piper Hungary’s annual real estate market analysis, demand for office buildings has continued despite the increasing popularity of telecommuting and hybrid work arrangements. Office real estate accounted for about 57% of law firm transactions, which is only a 3% decrease from the previous year’s figure.
Logistics real estate became the second most attractive asset class in 2021 with a 14% share, despite the fact that the majority of logistics complexes are owned by a few players. Moreover, interest in retail and hospitality properties has almost completely disappeared due to the pandemic.
“In 2021, the Hungarian commercial real estate market was characterized by two main themes: a large shortage of assets and a large number of off-market deals. This led to fierce competition for open market assets, which put further pressure on yield, especially in the case of assets logistics”
– Added Szilárd Kui, Local Partner and Head of Real Estate at DLA Piper Hungary.
Domestic investors accounted for 73% of all purchases (up 12 percentage points from 2020), which can be explained by concerns about COVID-19 and travel restrictions among other factors. At the same time, we have witnessed continuous interest from clients from the Far East and the Middle East; However, the limiting factor for them was that high-ticket assets are few and far between in the Hungarian commercial real estate market.
ESG Considerations in the Real Estate Market
In recent years, sustainability has made its presence felt in the real estate market as well, where environmental, social and corporate governance considerations play an increasingly important role in investor and tenant decisions year after year. In practice, developers are forced to obtain green certifications for new Class A office buildings, such as LEED and BREEAM, which are internationally recognized certifications.
“Sustainability has become a central aspect of business operations. The goals are clear to everyone (achieve reduced CO2 emissions, improve energy efficiency and provide a suitable working environment for tenants), so the question is not whether the newly developed property should have a green certificate, but rather From this, how sustainable operation is guaranteed throughout the entire life cycle of the property”