Commercial Real Estate Market May Experience Recovery

The National Bank of Hungary (MNB) said in a report published on Thursday that the commercial real estate market may be on the verge of recovery, having moved from a multi-year low in both domestic and regional data last year.

Speaking at a press conference in Budapest on the state of the commercial real estate market, the MNB's director in charge of financial stability and the central bank's asset portfolio, Tamás Nagy said that despite the adverse conditions, positive developments emerged last year, especially at the end of the year, when the Hungarian economy seemed to be on an upward trajectory.

According to Tamás Nagy, the continuation of the recovery may depend to a large extent on when and to what extent domestic industry picks up. However, financing is secure and bank lending conditions for commercial property investment are not expected to tighten this year.

The situation in the office market remains somewhat uncertain, as the effects of the post-global pandemic hybrid employment have proved to be long-lasting. A number of office buildings have been converted into accommodation in recent years, but new take-up could still push the vacancy rate from around 14% a year ago to 15% this year, although this is not a critical level, he said.

In industrial logistics, the overall picture is more positive, with investment rising to record levels, although unfavorable external conditions, notably the weakness of European industry, are not yet pointing to an improvement. Occupancy rates in this market may also temporarily rise slightly due to the high level of transfers, but fell below 8% last year.

Investment in accommodation is benefiting from the recovery in tourism, with guest numbers reaching pre-pandemic levels and hotel revenues up 17% in 2024. The outlook for tourism this year is also positive, which bodes well for new transfers.