MNB Commercial Real Estate Market Report: Activity may increase with economic growth

FMnewsroom – real estate, market report. According to the MNB’s latest Commercial Real Estate Market Report, performance indicators in the hotel sector have improved. At the same time, specific investor, government decisions and economic growth, could lead to improvements in other segments.

The downturn in the domestic economy in 2023 and its structure have not supported commercial real estate market processes, which remain subject to cyclical and structural risks. Among the commercial property segments, the hotel sector’s performance indicators improved in 2023, while the other segments could see some improvement due to investor, government decisions and the return of economic growth this yearMNB’s latest Commercial Real Estate Market Report finds.

Looking ahead

In 2024, with inflation moderating, wages rising and consumer confidence strengthening, domestic demand items will support GDP growth, which could positively impact the retail and hotel sub-segments. Though the weak European economy holds back the export performance, the realisation of significant foreign direct investment can help export growth in the long term. This could have a positive impact on industrial-logistical demand and development.

Vacancy rate

In the Budapest office market, the vacancy rate increased by 2 percentage points to 13.3% in 2023 and by a significant 4.8 percentage points to 8.6% in the industrial logistics market. Given the demand levels in 2023 and the volume of new space planned for delivery, the indicator is expected to rise further.

The decreasing trend of the volume of office space under construction broke in the fourth quarter of 2023. Due to the office needs of public institutions, several new buildings started.

In 2023, the volume of new developments in the industrial logistics segment fell by almost a quarter compared to the previous year. The pre-leasing rate of new space planned to be delivered in 2024 is also around 55% for office and industrial logistics developments, higher than the previous two years. 

Investors wait and see

In 2023, the investment turnover of the domestic commercial real estate market amounted to 0.6 billion EUR, 38% below the turnover in 2022. Of this volume, 82% was linked to domestic investors. Rising yields, high financing costs and moderate rental demand encourage investors to wait and see, which also predicts low investment turnover in 2024.

In all countries in the CEE region, yields on the best-located and highest-quality offices increased, and investment turnover fell between 24% and 68% per country. The capital values calculated based on primary office yields and rents decreased by an average of 8% in the CEE region and by 9% in Budapest by the end of 2023 compared to a year earlier. Cumulatively, over the past year and a half, a 13% and 21% decrease in value can be seen, respectively.

Tightened lending conditions 

In 2023, banks made 42% fewer commercial real estate project loans. The volume of new issuance decreased for all property types except hotels. According to the MNB’s Lending Survey, banks tightened lending conditions in all commercial property segments in the fourth quarter of 2023, and further tightening is expected in the first half of 2024 due to changed risk tolerance.


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