Sustainability a Central Element in Development Cycle

This is evident in the office market and is increasingly also so for logistics and other sectors like hotel and residential. There is also now a perceived need for sustainability elements in public buildings.

Sustainability requirements are now extended to include environmental, social and governmental (ESG) and EU taxonomy issues in planning, design, permitting, financing, leasing, property management, and an exit strategy. All this, in turn, requires benchmarking, transparency and accountability systems. ESG-related advisory services have thus become a growing business and specialty: KPMG, for example, has a dedicated property sustainability advisory department.

ESG and EU taxonomy act as roadmaps or frameworks for more sustainable and green products.

“We can clearly see that sustainability has become one of the major criteria for the real estate sector. Non-compliance with sustainability frameworks can even be a deal breaker nowadays, which is a new trend,” comments Zsombor Barta, president of the Hungarian Green Building Council (HuGBC).

“The EU taxonomy plays a very important role when it comes to the real estate sector’s sustainability, and the big international green building schemes also realize that; therefore, all have announced compliance routes with the Taxonomy requirements with similarities to the certifications,” the president explains.

“This will further evolve in the future for sure. Also, the net zero targets are clearly influencing the certification schemes, and more options and possibilities will be developed to certify net zero buildings or other strategies as well in the near future,” Barta says.

“It is still highly important that sustainability frameworks and holistic guidelines are implemented for all built environment projects because everywhere materials, resources, energy or land is used […], the active integration of sustainability aspects and measures are essential. Overall, third-party accreditations are a very useful tool for systematic thinking and the active integration of holistic sustainability aspects,” he adds.

Most Used

Breeam is the most used sustainability system in Central Europe by office developers, although Skanska, for example, prefers Leed across its whole international portfolio, including this region. The prolific developer was also one of the first to utilize the Well system in Hungary in its office projects. Most recently, Skanska has received Well “Core & Shell” pre-certification for the first phase of its H2Offices complex in the Váci Corridor.

The project is on course to be awarded the highest level “Platinum” accreditation for both Leed and Well and WELL platinum accreditation, according to the developer.

A similar trend can be found in the logistics sector, where seeking third-party sustainability accreditation is rapidly becoming the norm at the top end of the market for leading national and international industrial park developers and operators.

Prologis is developing in accordance with at least Breeam “Very Good” accreditation for its entire regional portfolio. Tenants are looking to save on utility costs, recognize the importance of staff wellbeing, provision of green areas, cycle parking and changing facilities, as well as electric vehicle charging units. Other factors include observing precautions concerning the transmissible viruses and the need to reduce the carbon footprint of their projects, said Prologis.

The Maglód and Fót HelloParks industrial developments in the Greater Budapest area are the first industrial buildings in Hungary to achieve Breeam “Excellent” certification in the “New Construction” category, according to the developer. For more on this, see page five.

Legislators are also impacting the landscape, with the EU introducing a common taxonomy for the single market.

“We are very proud and happy as the HuGBC collaborated with the Hungarian National Bank (MNB) on the adaptation of the EU taxonomy for the real estate sector in Hungary. Further, the HuGBC can also verify taxonomy compliances in this sector, which is again an important milestone related to the third-party verification of EU Taxonomy compliances,” comments Barta.

Net Zero Progress

Hungary is ranked 13th in KPMG’s “Net Zero Readiness Index.” Poland, for example, ranks 19th.

“Hungary has a Net Zero target in place, and its financial sector is working to stimulate the flow of capital to decarbonization efforts. Much of its electricity is generated by nuclear power, and it is developing solar capacity, energy efficiency and use of electric vehicles,” said István Szabó, a senior manager at KPMG Hungary. Buildings represent 17% of emissions, industry 21%, transport 23% and electricity and heating 23%, according to KPMG.  

As reported in the July 29 issue of the Budapest Business Journal, Pál Dános, head of real estate advisory at KPMG Hungary, explained that the Net Zero Readiness Index compares the progress of 32 countries in reducing the greenhouse gas emissions that cause climate change, and assesses preparedness and ability to achieve Net Zero Emissions of these gases by 2050. With regard to the construction market, professionals emphasize the need for a circular economy that eliminates or reduces waste in materials used.

The view expressed at the recent Poland Urban Land Institute (ULI) meeting was that the real estate industry “needs to produce adaptive and regenerative designs that make sustainable use of natural resources. Every developer needs first to ask if the project is actually needed, and if it is, then it needs to be built for long-term value, efficiently and with the right materials.” There is progress, but more is needed.

“Currently, the real estate sector is not one of the greenest sectors; however, it is clear that the sector is doing more year by year,” Barta acknowledges.

“As this sector’s negative environmental impact is huge, there are still enormous challenges to overcome; there is lots of work to do in the future. The good news is that there are positive trends and directions; there is a lot of knowledge about how we could do much better within this sector,” he says.

“As long as non-sustainable solutions (such as materials, products, services, etc.) are financially the more beneficial options, sustainability cannot be implemented widely and for the entire sector. Sustainable options need to become the new norm, the financially attractive and, therefore, cheaper solution,” Barta concludes.

This article was first published in the Budapest Business Journal print issue of September 23, 2022.