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Currently, analysts see the most attractive development sectors as industrial, hotel, and residential, with the number of manufacturing and logistics tenants, hospitality guests, and potential homebuyers having risen significantly in recent years. In the office sector, more staff are working on-site again and, in the case of retail, it seems consumers still enjoy a physical shopping and leisure experience.
“The number one obstacle for developers is financing and yields, higher-for-longer debt costs and stricter bank underwriting. The response is to de-risk via higher pre-lease/BTS ratios, phased capex, and green/sustainability-linked lending that benefits from EU Taxonomy alignment,” comments Máté Szoboszlay, business development and investment director at Faedra Group.
“There are supporting factors that may generate continuous demand in the industrial sector,” reckons Zsófia Korda, chief sales officer at Wing Industrial. “Currently, the main driver is from large-scale industrial investment. Considering that Hungary’s industrial policy is strongly one-sided, focusing predominantly on battery factories and the related value chains and supplier networks, any slowdown or acceleration in this sector has a direct impact on the local industry,” she says.
Built-to-suit is becoming the favored development model in the industrial sector, following a speculative development boom that has led to rising vacancy and increasingly complex and specialized requirements on the demand side.
BTS is also clearly the development option of choice in the office sector, with both rising vacancy and concerns from developers and lenders over demand, although on-site working is again becoming a market norm. Office staff and, in turn, tenants, have increasingly complex expectations regarding the office environment and location.
The priority for hotel developers is to secure a respected, reliable partner with a strong brand and sales force to take responsibility for the complex day-to-day management of a hotel asset, according to Attila Madler, country chief asset management officer at CPI Hungary.
With regard to residential projects, many developers undertake phased developments, concluding a significant proportion of sales contracts as early as possible in the development process.
Banks remain reluctant to finance office developments due to the expected rise in vacancy. This can be mitigated by achieving a high pre-lease ratio. Both investors and banks are generally supportive of hotel projects.
“We are seeing positive momentum on the ground; our projects are moving forward with strong tenant interest, which really shows how the market is shifting towards quality, sustainable workplaces,” says Aurelia Luca, executive vice president of operations for Hungary and Romania at Skanska.
“Maybe one of the biggest challenges is navigating the constantly changing sustainability rules and ESG reporting requirements. It’s not just about setting bold targets; it’s about turning those goals into clear, data-backed results you can trust,” she adds.
ESG compliance is becoming standard practice in CEE development, in particular in the office, industrial and logistics sectors. It is less so in retail and hospitality, where cost, tenant mix and use patterns are more complex properties, but even here, sustainability is becoming more important.
“For each sector, the focus is slightly different: offices require deep retrofits and smart building upgrades; industrial needs energy efficiency plus on-site generation and resilience; hotels must balance guest experience with carbon and water savings; and retail will increasingly prioritize mixed-use, last-mile logistics and ESG-friendly tenant mixes,” according to Zsombor Barta, founding partner of the sustainability consultants, Greenbors.
“Overall, ESG requirements are shifting the risk/return profile of real estate: projects that treat ESG as a capital-good investment outperform; those that don’t face regulatory, financing and obsolescence risk,” he warns.
“The biggest challenge for developers is not whether to integrate ESG, but how to do it cost-effectively and credibly. Rising construction and retrofit costs, fragmented regulation across EU and national levels, and limited availability of green finance in some markets create friction,” Barta argues.
“In Hungary and Central Europe, developers also face gaps in reliable ESG data, a shortage of local expertise in sustainable design and operation, and sometimes a disconnect between short-term leasing horizons and long-term ESG payback,” he says.
“These can be overcome with three levers: early integration of ESG into project design, alignment with EU taxonomy and energy performance standards to access green capital, and greater collaboration with tenants and operators through green leases and shared performance targets. The developers who succeed are those who treat ESG as an investment in resilience and value, not as a compliance cost,” Barta adds.
Regarding an exit strategy, big-ticket transactions have been concluded by domestic investors. However, there are signs that international money is returning to Hungary, with value-added redevelopment projects being concluded by foreign capital.
Appetite for logistics remains strong, but more noticeable is the growing interest in hospitality (standing or conversions) and residential (purpose-built student accommodation and micro-living). Thus, hospitality and residential asset classes account for an increasing share of investment activity, says Benjamin Perez-Ellischewitz, principal at Avison Young Hungary.
From a positive perspective, the fundamental changes in the development and investment markets require the development of ever more high-quality, imaginatively designed and ESG-compliant products to meet the complex demands of tenants, investors, lenders and EU taxonomy requirements.
This article was first published in the Budapest Business Journal print issue of October 17, 2025.
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