The market is continuing to grow despite some market concerns over moderating demand that is causing developers to move towards a more cautious built-to-suit development model, rather than the more ambitious speculative model.
“I am optimistic with regard to the industrial market with a healthy pipeline and strong demand in both the Greater Budapest area and in regional hubs,” comments Valter Kalaus, managing partner at Newmark VLK Hungary, who is active in the industrial sector.
“In spite of higher availability, there is a pipeline of nearly 700,000 sqm in the coming year or so, 390,000 sqm of which is in the Greater Budapest area and 300,000 sqm in regional hubs,” he adds.
Kalaus sees the role of his firm in the current market environment as providing consultative or tenant representative advice to clients in the office, industrial, hotel and retail sectors, in addition to brokerage services.
“It is no longer enough to be exclusively a brokerage firm as there is an ever increasing need to provide consultative advice in the current market environment. With regard to advice on ESG issues, this is currently a hot topic and previously was more dominantly in the office sector, although it has become more of a factor in the industrial sector,” he notes.
To the background of a cooling in the industrial market, where the overall vacancy rate has risen to 8-9% from a low of 2-3% a few years ago, BTS has become the preferred development option as manufacturing and distribution hubs have become more important.
As a result, developers and landlords increasingly need to develop in accordance with tenant-specific solutions, although this provides less flexibility from the perspective of landlords and developers with regard to future lettings. Developing a facility for a car manufacturer or supplier is very user-specific, for example.
With regard to ESG and sustainability issues in the industrial sector, these elements have come to the fore, as had previously been the case with offices. This is central to tenant demands regarding the health and well-being of staff and the creation of what is seen as a healthy working environment.
This includes natural lighting, the provision of green energy, sustainable waste disposal and a low carbon footprint. Tenants and landlords have common obligations in moving towards zero-carbon goals, a pathway that both the industrial and the office sectors now find themselves on.
Financial concerns have come further to the fore as there is generally a longer negotiation process due to more specific demands and ESG requirements in pre-leases with, for example, a preference for heating to be via heat pumps rather than gas.
Cities in the countryside beyond Budapest, such as Győr, Kecskemét, Miskolc, Debrecen, Nyíregyháza and Szeged are now attracting inward industrial and logistics investment. It is increasingly important that all parties work together to resolve ESG and labor force challenges in order for the market to grow, Kalaus concludes.
This article was first published in the Budapest Business Journal print issue of November 29, 2024.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
