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CPI: Developers Must Walk the Sustainability Talk

Office Market

Mátyás Gereben, country manager of CPI Property Group Hungary.

Landlords have a critical role in raising sustainability awareness among their staff, tenants and the broader society and establishing two-way communication with regulators to shape meaningful and enforceable legislation, according to a leading Budapest property developer.

By Robin Marshall

Mátyás Gereben is country manager of CPI Property Group Hungary, which has long regarded itself as a pioneer in real estate sustainability.

“For quite a while, we have had a sustainability framework with exact goals on our website. By 2030, we must reduce CO2 emissions, water consumption, and so on, but set amounts,” he tells the Budapest Business Journal.

“We’re working hard on putting an action plan behind that, which is not only words and goals that sound good, but is followed up by the actions through which we can achieve that.”

Too many corporate plans are little more than hot air or “greenwashing,” he suggests. CPI, on the other hand, is investigating the amount of green capex it is investing in its buildings and what the tangible reduction in emissions will be.

“If we change an air handling unit, or if we change the building management system to a smart one that can communicate between all the functions in the building and save energy, what does it do to our emissions and our plans to reduce them? We are doing this calculation building by building.”

If landlord investments are one part of the story, tenant education is another and just as important, the CEO insists.

“Most of our energy is consumed by the tenants. We can be super smart, but if they cannot utilize this knowledge or the tool we’re giving them, it becomes very difficult to save,” Gereben explains. “So, we have to educate them. We’re preparing symposiums, communicating through multiple channels to help them understand what they have in their hands, how to use the resources of the office building or the shopping center correctly.”

Evolving Market

Alongside that are “green leases,” a two-way contract between landlord and tenant to explore ways to become more sustainable. That can help tenants achieve a better ESG score that may help them achieve more financing. It is another example of what Gereben sees as an evolution of how the market operates, although more so in the office sector than retail.

“Right now, it’s going through a vast change compared to the last 20 years. Tenants would like to see their office space as a service, not as a concrete structure within which they can operate. Here, I believe CPI has enormous opportunities to differentiate itself as a service provider. How we respond to those needs from the tenant side will help the tenant believe our services are lasting and professional.” Crucial to that is flexibility, not in terms and conditions but around space.

“This is a risk on our side, but it also offers a great advantage if we’re able to communicate that tenants sign for 20% less than they think they require, and the rest, we control as it is needed.” Another idea is the promotion of networks within the CPI tenant community as an opportunity to find new partners and business. The goal is that such a flexible and service-orientated approach will help attract new tenants and retain existing ones.

The need to embrace sustainability and ESG principles seems like a given now. We often hear developers and landlords are being driven toward being greener by the twin pressures that come from regulators and tenants. But Gereben sees a more nuanced picture.

“Today, I would assume that tenants who are opening up towards these kind of initiatives would be 30-40% of all our clients,” he says. He is quick to point out that the figure is a “guestimate. [….] It’s very difficult to say, but while the numbers are increasing in Hungary, I see it’s a slower process than in other countries in the CEE region.”

Much of the emerging regulatory framework comes from the European Commission, but that still needs to be localized. Gereben identifies that as a problem when asked why companies might be less engaged in Hungary than the rest of the CEE.

“It’s a lack of regulations or less obligations. I’m speaking against myself because obligations and regulations always mean costs, expenses, and thus lower profit. But if we invest in being green now, maybe it gives us the chance to benefit from it in the future,” Gereben says.

Cost Worth Paying

“It is a cost that I believe, and CPI believes, is worth spending. But if you don’t have the right framework from the regulatory side, companies and organizations will stretch only as far as is necessary,” he warns. However, Geregen also says developers must engage with authorities through platforms like the Hungarian Green Building Council.

“It is not only the regulators’ responsibility to develop smart packages for how companies should be sustainably responsible. I think it also requires us, the big developers who are the main characters in forming the urban environment,” he argues. “We do have responsibilities to work together with those guys ‘up above’ and make sure that they understand what we’re doing, and we understand what they want to achieve.”

One example of this illustrates another developing trend that is only “in a very preliminary stage at the moment in Hungary:” reusing renovated furniture and fittings rather than buying new. It is much more established in Scandinavia, where it is becoming a marketing tool.

“Moving into an office where you use renewed materials is much more posh or trendy there than moving into a newly fitted-out office,” Gereben says.

CPI did precisely that when moving into its new offices in its Balance Hall building. But there are still roadblocks. Otherwise perfectly useable modular carpeting cannot be moved from one building to another to be given a second life because it is currently impossible to get fireproofing certification for reused carpets. Again, it highlights the need for good communication channels with the authorities.

Gereben has one final thought to share, which circles back to that point about greenwashing and the need for actions that back up aspirations. He says it is not enough to tell the market what to do; you must “walk the talk.”

“Personal education and employee involvement in this process is essential. I’ll tell you one example. In our kitchen, we have a compost robot, a compobot. There is a competition between the employees to see who’s using it most efficiently, who is ‘feeding’ it with the most compost,” he explains.

“People have started to bring composite waste from home to be part of the race, which before they would have dumped in the normal trash. Taking the time and energy to separate it into some bags and bring it in, most of this is fun. But, at the same time, it’s also a change of mindset.”

This article was first published in the Budapest Business Journal print issue of September 8, 2023.

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