12 May 2025
From 2024 Q2, the increase in primary yield came to an end in all segments of the commercial real estate market; however, in the second half of the year the slow growth of GDP failed to provide a significant boost to market activity.
In terms of the cyclical position of the market, the results of the Royal Institution of Chartered Surveyors (RICS) survey continue to reflect high uncertainty: half of the professionals surveyed in January 2025 still perceived a recession, while the other half already saw the initial recovery in the market. In 2024, unlike several countries in the CEE region, investment turnover in Hungary continued to decrease year on year, and the majority of it was linked to domestic investors. The vacancy rate of the Budapest office and industrial-logistics market is expected to increase in 2025. In 2024, credit institutions disbursed 36 per cent more project loans secured by commercial real estate compared to the previous year, which represented a low base.
Performance indicators for the hotel sector improved as tourism picked up, with an increase in both the number of foreign guest nights and domestic guest nights in 2024. Retail sales rose, and vacancy rates in the retail segment improved, both in rural areas and in shopping centres in Budapest. The vacancy rate in the Budapest office rental market rose by 0.8 percentage point to 14.1 per cent in 2024, while the industrial-logistics market recorded a decline of 0.7 percentage point to 7.9 per cent. With the demand levels seen in recent quarters and the amount of new floorspace slated for completion, a moderate increase in vacancy rates is expected in both the Budapest office and industrial-logistics markets. The volume of office space currently under construction includes a high proportion of owner-occupied office buildings, but relocations are freeing up space currently in use, leading to rising vacancy rates.
In 2024, investment turnover on the domestic CRE market amounted to around EUR 400 million, down 28 per cent on the already low level from 2023. However, investment turnover in the CEE region has increased by 69 per cent on average. Prime office yield levels (on real estate at prime locations and of the highest quality) already stagnated in the second half of the year. The low investment flows in Hungary continue to be concentrated, with domestic investors accounting for 73 per cent of such, and this may pose a risk to the perception of the Hungarian market.
In 2024, banks disbursed 36 per cent more CRE-backed project loans compared to the low base from one year earlier, with two-thirds of these disbursements related to construction loans. Aside from hotels and office buildings, an increase in new issuance was registered for all property types. According to the MNB's Lending Survey, banks tightened their loan terms and conditions for office buildings and logistics centres in 2024 Q4, but no longer foresee any further tightening for 2025 H1. Overall, the exposure of domestic credit institutions to project loans backed by CRE is moderate in terms of both balance sheet total and own funds, and the non-performing loan ratio continuous to be low.
https://www.mnb.hu/en/publications/reports/commercial-real-estate-market-report