Market Talk: Developing a Pandemic-proof Real Estate Future for Hungary


The COVID-19 pandemic has impacted the various sectors and the development, property management and exit phases in the life of a real estate project in different ways and to different degrees. Gary Morrell, real estate editor at the Budapest Business Journal, speaks with some of the leading players in the country about the prospects and challenges for Hungary.

Nikolett Püschl

The conventional wisdom is that industrial is in the most positive position in the short- to medium-term, although developers will need to make significant changes with regard to the provision of amenities, energy usage and the design and management of complexes in order to continue to attract tenants.  

The office sector will need to adapt to changes in work habits, with changes in interior design, layout and property and facility management of complexes. Hotel and retail face the need to make more fundamental changes to their products in order to maintain demand and keep projects viable in the longer term.

All sectors were already having to reconsider and reevaluate their design, PM and FM strategies to meet the changing and more complex requirement of tenants, staff, customers and guests, not to mention ever stricter sustainability requirements and regulations. These have now intensified and developed as a result of the coronavirus pandemic and its aftermath.

All of the above have to be taken on board and market fundamentals need to be positive in order for a project to be successful and to provide an exit strategy for developers once the investment markets pick up. Investors, however, will continue to require quality product and well-formulated and designed assets if they are to be regarded as investment-grade.

I think the development possibilities in the office sector will not change significantly in the future in Budapest. Our capital continues to provide attractive opportunities at a good price to value ratio. In the CBD [Central Business District] and Central Buda locations, building renovation projects will be dominant and supply in the larger submarkets such as Váci Corridor, Central Pest, Non-central Pest and South Buda will rather be stand-alone buildings and city-in-a-city or campus style concepts. We are ever more diversifying our development portfolio. As of today, we are present in four different submarkets, with two projects in Buda and two additional developments on the Pest side. We are ongoing confidently, step by step.

My vision for the longer term is that the countryside, and especially university towns like Debrecen, Szeged and Pécs will become more relevant and, accordingly, new office submarkets will be born.

Office tenants are now in a kind of reorganization era, which is of course resulting in changes in their demand. Size optimizing, smart solutions, efficiency and flexibility is the key. The demand for modern high-tech spaces is still there. Transactions are happening and there is activity on the market. As per our experience at Atenor, the development possibilities are still there and if the necessary financial sources are in place, then I do not really see obstacles to developing in the office sector.

Nikolett Püschl

Leasing & Development Director

Atenor Hungary

Gábor Borbély

Hungary remains attractive as an investment destination with development pipelines with high percentages of preleases. There is available finance, skilled labor force, cheap and favorable business conditions and customers looking to enter Hungary and expand. With regard to an exit strategy for developers, investors are looking at the industrial sector and there are no development delays, with a significant pipeline and strong demand for the sector. Although there is more nervousness regarding the office sector, 70% of the 2020 pipeline is preleased. With regard to investment, there is still a lot of money in the system waiting to be deployed.

Gábor Borbély

Business Development & Research Director

CBRE Hungary

Adorján Salamon

Amongst the main CRE sectors, office has the most impressive development pipeline by far with nearly 600,000 sqm under construction and 106,000 sqm to be delivered by the end of this year. As banks begin to request solid prelease ratios and investigate tenant credit ratings more, we foresee some delays in handovers; in return, vacancy may be kept under control. Demand has increased dynamically in the logistics sector; however, speculative developments are still not common as developers prefer to agree with prospective tenants first. After the completion of 104,000 sqm in the first half of the year, another 90,000 sqm of new warehouses are expected to come to the market in the second half year. Large retail developments are still absent with a few exemptions, “plaza stop” [a law introduced to stop the spread of hypermarkets at the expense of smaller stores] still applies and development activity is not expected to jump start in the next 12 months. Budapest hotels are especially exposed to the COVID pandemic; revenues for some may drop by 70%, according to a forecast of the Hungarian Hotel and Restaurant Association, thus, no major developments are expected in the following months.

Uncertainty, falling take-up levels and decreasing revenues of tenants are affecting the pace of development the most; in addition, banks tend to apply more strict conditions to secure the financing of new schemes. Once take-up levels come back to their previously seen increasing course, developments will expand dynamically. There are a great number of planned schemes prepared for launch and many developers already have proper landbanks to suit future demand. Furthermore, a vast amount of investor equity is seeking its way back to the market, so the demand for new product will induce new developments in the coming years.

Adorján Salamon


Eston International

Viktor Nagy

In the office segment, we see that flexible working and home office will be in greater demand. Nevertheless, home office will never completely replace the office workstation. We are convinced that the social aspect and personal interaction are particularly crucial for innovation and productivity in companies. There will, therefore, continue to be demand for high-quality office space with added value. In the medium- to long-term, there may, of course, be changes in the space requirements of individual tenants. It is, therefore, very important to focus on the needs of the customer: flexibility and community play a central role here and office landlords have to pay much more attention to the needs of their customers. In the future, it will not be enough to just hand over office space to the tenants. However, those who meet these needs for more service can expect more rental income. Because for the customers, too, this means added value that goes far beyond the provision of space. What has definitely changed is that tenants are looking for more flexibility.

We saw this trend emerging even before COVID. That is why we already had planned to enhance our office concept. This includes, for example, flexible rental space, which is already reflected in our myhive concept: we will offer even more options for tenants; modern, attractive workspaces of any size with flexible variability. We have had mandatory tasks related to the virus (cleaning, hygiene and elevator rules, plexiglass at the receptions, distribution of masks), but our buildings had served our tenants in all respects in the same way during the previous period.

Viktor Nagy

Country Manager Operations

Immofinanz Hungary

Péter Würsching

We expect that, in the short-term, office demand will decline due to the COVID situation; however, following the crisis, we expect employees to return to the offices, although home office will remain for one to two days a week in the long run. Regarding the leasing terms, we expect more flexibility (contraction/expansion) and shorter rents (seven-to-10-year contracts will not remain) and more focus on employee satisfaction.

Péter Würsching

Head of Office Agency

JLL Hungary

Paweł Sapek

All our Hungarian parks, currently nearly fully let, are primarily located next to highways and other strategic transportation routes. Given the success of Prologis Park Budapest-Sziget, we feel confident about further investment in this area. We recently expanded our portfolio with a 13-hectare site, located just across the road from Prologis Park Budapest-Sziget. Depending on customer needs, we are able to deliver both speculative and BTS facilities.

Based on our COVID-19 special report series, we expect that demand slowdown caused by the pandemic will be short-lived as logistics real estate is poised to benefit from the acceleration in the transition to e-commerce. Our research also found that planning for future disruptions could gradually push many industries toward a greater diversity of manufacturing locations, including on- and near-shoring. Low-cost production centers, such as CEE are beginning to see increased interest. However, these changes are likely to be a long-term trend that plays out over several years. One of the challenges is that the number of available spaces is limited, therefore the markets are running into capacity constraints. Another crucial topic in logistics real estate is labor. According to research, labor supply and retention are among our customers’ biggest concerns. We are working to address these pain points by offering more than just warehouse space to our customers: we design our parks to support the wellbeing of their employees, too.

Looking at the Budapest market as a whole, we see significant development potential in the South-Pest region, in the area of Szigetszentmiklós [22 km south of the capital] and Gyál [21 km southeast]. If the western and southern regions of Budapest become saturated, further expansion may even shift towards the eastern and northeastern regions of the capital.

Paweł Sapek

Senior Vice President & Regional Head Central Europe


Dr. Mihály Schrancz

In my opinion, we have seen this pattern, and gained valuable experience, back in 2008, when the office market was slowing down: tenants expressed the need for moving into newer and more modern office buildings back then as well. To no surprise, premium location and environmentally friendly, green solutions are still appealing on the market, and even though home office was more than inevitable lately, it is not sustainable in the long run for most companies. For now, we have not registered any decline of interest, but a great amount of attention has shifted to experimenting with the optimization of office space.

In the housing market, customers and investors are both reluctant to progress, which could be helped by the government’s economy-boosting steps. The fallback of tourism affects us as well, since we are developing a hotel at BudaPart, but as our products are crisis-resistant, we can anticipate changes on the market in a collected manner.

COVID affects the whole world’s economy, both on the demand and the supply side, which has an impact on financing as well. This means that the market gets tighter and clearer, in which only the best developments can stay successful. From the beginning we have paid significant attention to develop products that hold their value and stay crisis-resistant in the business, technical, architectural and communal fields. Our BudaPart project keeps proving that residential sales and office leasing have been more than successful despite the pandemic; furthermore, 12 companies have already moved into BudaPart Gate, our very first office building. I think it is too early to talk about a “financial crisis” and if they develop an effective vaccine, then a quick recovery can be expected. In the property market, those players who create such professional products, which are prepared for an accidental crisis from the very first phase, when concepts are only in formation, will be successful in the long run. Furthermore, I think location will remain a key aspect and gain even more focus; therefore, the demand for well-placed and modern buildings will still be high. BudaPart, as a project with mixed functions offers a complex opportunity for its residents and tenants.

Dr. Mihály Schrancz

Managing Director

Property Market


Hungary PMI Rises to 52.2 in February Analysis

Hungary PMI Rises to 52.2 in February

Hungary Makes Proposals to Ease Administrative Burden for EU... EU

Hungary Makes Proposals to Ease Administrative Burden for EU...

Colette Matz Named New Country President of Novartis Hungary Appointments

Colette Matz Named New Country President of Novartis Hungary

Investors of the Year in Limelight at Hipa’s Award Ceremony Awards

Investors of the Year in Limelight at Hipa’s Award Ceremony


Producing journalism that is worthy of the name is a costly business. For 27 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.