The Eternal Optimism of the Bricks and Mortar Merchant


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Real estate developers are, pretty much universally, a positive bunch of people. They have all the enthusiasm of the natural salesperson, unsurprising since their job is to sell you an idea or an asset, depending on where you meet them on a project timeline.

That’s not to say they are relentlessly upbeat. I have, on several occasions, enjoyed hearing a group of them exchanging complaints about who has gazumped whom for a particular plot, or the lack of transparency in the planning process, or how today’s problems are nothing compared to doing business in the republics of the former Yugoslavia in the Nineties and Noughties. But that aside, they are a “glass half full” species.

I was struck, during the pandemic, by how relaxed they were about the whole “death of the office” line of reasoning. One regional developer produced studies which, it argues, prove that most people prefer to be in an office. As one of my more cynical colleagues puts it, “Well, they would say that, wouldn’t they!” But I have spoken to enough CEOs to know that there are probably three times as many keen to get staff back in the office as there are those ready to embrace the flexibility that remote working offers. The divide largely depends on their field of business and just how tight the labor market is for the skillsets they need. IT firms are generally much happier to embrace a “work anywhere” mentality, not least because so many of their staff demand precisely that. And while almost everyone seems prepared to consider variations on the hybrid theme (albeit with plenty of arguments about where the office vs. home split should fall), I have read some isolated views from America which condemned hybrid as “the worst of all possible worlds” and called for one or the other, but not both.

As the Special Report in today’s issue on Real Estate Development makes clear, the market is pretty healthy, especially in the industrial and logistics sector. But that doesn’t mean there aren’t a few dark clouds gathering. The ongoing pipeline continues, but new projects are increasingly on hold. That makes sense when finance is getting more expensive; why build today when it will be cheaper tomorrow? But as our Macroscope report on page three makes clear, if inflation continues in the high double digits well into 2023, when exactly will tomorrow come? The war in Ukraine has had a direct impact on the supply chain for raw and finished materials. It may also have some effect in scaring off the more risk-averse investors, although looking at Hungarian fundamentals (not to mention a map) ought to provide comfort.

Energy is the big concern for everyone. It makes sustainability and energy efficiency ever more important for developers in terms of the costs of running a building, attracting tenants, or finding investors to buy. But I wonder if there might not be a more immediate concern. Our daily newsletter Hungary A.M. carried a story on Wednesday, October 19, about a city center hotel that has announced it will take no bookings over the winter period because of the cost of energy. We know of several cultural institutions that have taken similar steps. If those same costs make it more attractive for an employee to commute to the office and let work pay for the heating (an argument I have heard from at least one developer), might there not also be businesses who think the same, but in reverse?

These are, as everyone keeps telling me, interesting times. I don’t believe any of the developers I speak to regularly are about to give up their membership of the positivity club, but there might at least be a nanosecond’s pause for thought come renewal time.

Robin Marshall


This editorial was first published in the Budapest Business Journal print issue of October 21, 2022.

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