“Locational issues and transportation systems are central to ESG in real estate as they influence accessibility, reduce carbon footprints, and impact overall urban sustainability. Efficient transportation and strategic location choices enhance connectivity, reduce reliance on cars, and support greener, more livable cities,” comments Zsombor Barta, ambassador to the Hungarian Green Building Council (HuGBC).

Modern office staff, who often work flexible hours, prefer to be located in areas well integrated into the city so they can utilize local amenities and commute quickly and safely on public transport, for example, or by bicycle.

“People are more aware that traveling time is valuable and can be used for mindfulness, relaxation or physical activity. Staff require clean and reliable public transportation and convenient and pleasant storage of means of active transportation, showers and changing rooms,” says Regina Kurucz, a sustainability consultant and Well assessor.

An excellent example of the centrality of location and access is the BudaPart suburban waterside development by Property Market on a 54-hectare site on the southern Buda bank of the Danube at Kopaszi Gát. The project includes office, retail, hotel, leisure and residential elements and large park areas. It is developing a new city quarter based on the 15-minute neighborhood concept, whereby a person can access all basic day-to-day needs within a 15-minute walk.

Location has always been a critical aspect of sustainability, comments Norbert Szircsák, head of ESG advisory services at Colliers Hungary.

“Commuting to a building can significantly impact its carbon footprint, so good public transportation options, amenities for cyclists, and the availability of electric car chargers are all crucial for reducing negative effects,” he notes.

“We now see many developers discussing the concept of 15-minute cities, where nearby amenities like childcare, shopping, and sports facilities can significantly reduce the carbon footprint of a neighborhood,” Szircsák adds.

Sustainable Mindset

International developer Atenor says it tries to focus on sustainability issues long before assessing the accreditation opportunities of a project.

“We start with a mindset on sustainability, thus intend to select brownfield, inner-city sites with existing infrastructure, where we can substantially upgrade the urban environment,” says Norbert Schőmer, the country manager at Atenor Hungary.

“I think we need a greater focus on cooperation in improving and maintaining public spaces. In all Atenor projects, we intend to create public spaces that can be visited and used by local residents and the wider community. Generally, we have great cooperation with local municipalities; however, their limited budgets often force them into ESG destructive decisions, such as enhancing inner city public parking,” he adds.

Skanska makes the point that the location of a building is of great importance for its function. For example, for an office building, a central location with access to a wide range of public transport options helps to significantly reduce the use of private cars on the commute to work.

“When examining the impact of a property on the environment, one cannot limit oneself only to the boundaries of the property; this element related to the carbon footprint caused by the commuting of users is also important when we talk about investments supporting sustainable development,” the developer says.

“One of the key aspects of environmental accreditation systems is the accessibility of public transportation and the use of electric vehicles. Prioritizing both of these modes significantly reduces the environmental impact of transport, both in terms of emissions and noise pollution,” comments Tibor Ruzsinszki, head of asset and property management at Gránit Alapkezelő Zrt.

“A building that is easily accessible by public transportation and offers electric vehicle charging stations, as well as other e-mobility options, has a much smaller environmental footprint in terms of transportation,” he points out.

Bringing Back Buildings

Another development option is the redevelopment and renovation of existing buildings, notably in the historic Central Business District, where there is a scarcity of building plots but a number of listed buildings in need of renovation.

A prime recent example comes from Europa Capital, which has redeveloped the 12,500 sqm Academia office center in partnership with ConvergenCE as the asset manager, undertaking extensive renovations that target Breeam and Well accreditation.

“ESG requirements are mainly tenant-led, and we designed the Academia project based on ESG principles using the Hungarian architects BuildEXT. This is located in the CBD, where there are few developments for new build projects. We do not undertake the development of new buildings from the ground up but focus on value-added development of existing buildings that require refurbishment,” says Csaba Zeley, managing director of ConvergenCE.

Regarding the influence that the EU Taxonomy is having on architecture and urban development, Barta of HuGBC argues that regulatory compliance is encouraging cities to align local regulations with EU Taxonomy standards, promoting uniformity in sustainability practices across the EU.

Market competitiveness enhances the position of cities that prioritize sustainable development, attracting businesses and residents seeking environmentally responsible living and working environments. The expert argues that this improves overall urban quality of life through greener infrastructure, better air quality, and increased green spaces.

ESG issues in real estate impact the wider population and city environment by promoting sustainable building practices, improving air quality, and enhancing energy efficiency. They can improve quality of life by reducing environmental footprints, creating healthier living spaces, and fostering community well-being through green infrastructure and responsible development.

“These issues are critical to ESG as they affect energy consumption, emissions and access to amenities and services. In our experience, proximity to public transport and sustainable infrastructure enhances the environmental and social aspects of real estate projects, thereby increasing their market value,” concludes Tamás Balogh, counsel and real estate service stream leader at law firm DLA Piper Hungary.

This article was first published in the Budapest Business Journal print issue of September 6, 2024.