Industrial Developers Committed to Sustainability Accredited Complexes

Industrial

The Hungary stand at the Mipim real estate expo sought to promote the country’s industrial excellence, amongst other things.

Photo by Expo Group event management.

The 45,000 sqm MG3 warehouse at HelloParks Maglód in Greater Budapest is the first industrial property in Hungary to achieve the Breeam “Outstanding” sustainability rating for New Construction, the highest standard in the third-party accreditation system.

Sustainability accreditation is being increasingly utilized in the upper strata of the industrial sector, with regional developers and park operators such as Prologis, CTP, Panattoni and HelloParks developing more highly specified Breeam- and Leed-accredited complexes.

As with the office market, tenant demands are acting on market players as increasingly stringent environmental regulations simultaneously come to bear. However, the market still has a long way to go. According to Cushman & Wakefield, only 23% of the industrial stock in Hungary has any green certification.

“Tenants in Hungary are gradually encouraging landlords to provide renewable and energy-efficient solutions, thereby improving the ESG outlook for the stock. This indicates an area ripe for significant improvement in the short term,” says the consultancy. 

HelloParks says it has seen this shift as an opportunity from the start, believing the winner will be the one who is seen as leading the way toward the green transition. The EU regularly introduces new legislation pushing and promoting the green transition and the shift to sustainable operations while also putting more pressure on the market, comments Anna Bencze, head of sustainability at HelloParks. She sees the main sustainability concern of tenants as efficiency in energy use.

“As a market leader, we have a major impact on the supply chain, and thus on the potential for reducing the carbon footprint of construction materials and introducing new good practices,” she says.

“We can also influence other players in the market by example, hopefully accelerating certain market processes, as our targets are ambitious and concrete, and we want to motivate the sector with them,” Bencze adds.

HelloParks says it is continuously comparing the performance of its buildings with the limits and science-based targets published by international voluntary carbon reduction and neutrality organizations, as well as those of countries that have already set more stringent, specific life cycle carbon limits, such as Denmark.

“These show that we are on the right track and that the decision to start very early on carbon reduction will pay off, as our buildings fit (and will continue to fit) these reduction pathways,” she argues.

“At the EU level, the assessment and certification of life-cycle carbon accounting will soon come to the fore in the context of the EU’s EPBD [Energy Performance of Building Directive], and we look forward to demonstrating our quantitative performance in this area. Our buildings comply with EU Taxonomy, which is designed to determine whether or not a project can be considered sustainable through the EU Sustainability Reporting Framework,” Bencze concludes.

ESG Compliance the Norm

ESG compliance is becoming the market norm for real estate investment transactions, reflecting a broader commitment to sustainability from all parties. However, given the current investment environment, the timing in terms of ESG costs is not ideal. Investment volumes for Hungary fell by 52% year-on-year for 2023. Sellers are, therefore, re-assessing their strategies and optimizing their portfolios in terms of letting capabilities with regard to ESG compatibility, said Kevin Turpin, head of CEE capital markets at Colliers, at the recent Sustainable Investment Breakfast by Colliers and Dentons at the W-Hotel Budapest. 

Sustainability Accreditation Spreads to More Property Sectors

After the office and industrial sectors, sustainability accreditation is likely to become increasingly common in several other property sectors as the emphasis on environmental sustainability grows across industries, comments Zsombor Barta, sustainability consultant and ambassador for the Hungarian Green Building Council. With the rise of eco-conscious consumers, retail properties will face pressure to demonstrate their commitment to sustainability. Retailers may seek sustainable accreditations for their stores and shopping centers to appeal to environmentally conscious customers and differentiate themselves. Hotels and resorts increasingly adopt sustainable practices to reduce their environmental footprint and appeal to environmentally-conscious travelers. As consumers become more aware of the environmental impact of their homes, residential developers may seek sustainability accreditations for their housing developments. Healthcare facilities recognize the importance of sustainability in providing high-quality patient care while reducing operating costs and environmental impact. Barta adds that educational institutions, including schools, colleges, and universities, are increasingly incorporating sustainability into their campus planning and operations.

Hungary a European Center for Green Automotive Production

The decision by BYD, the globally leading Chinese maker of electric and plug-in hybrid vehicles, to locate its first European EV manufacturing plant in Szeged after securing a 300-hectare site in the city is seen as a further success in attracting the sector to Hungary. The pro-active strategy of the Hungarian Government and city authorities across Hungary is seen as a significant vehicle for job creation jobs and enhancing green industries in regional Hungarian hubs.

“The newly announced project underscores not only the Hungarian Government’s strategy to be a pioneer of electric automotive manufacturing, but it also showcases its successful cooperation with Chinese customers,” said the Hungarian Investment Promotion Agency.

“Hungary proved to be the perfect location for BYD’s first European e-car manufacturing plant due to its business-friendly environment, available and well-developed infrastructure and logistics connections, skilled workforce and dedication to a green energy transition,” concludes Hipa.

This article was first published in the Budapest Business Journal print issue of April 19, 2024.

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