The decline in commercial property values came to an end in 2024 H1, and there was a positive shift in the perception of the market’s cyclical position. However, lower-than-expected GDP growth failed to provide a significant boost to the recovery in rental and investment activity in the latter half of the year. GDP growth going forward is expected to be broader based and to accelerate to 1.9–2.9 per cent in 2025, while the emerging turnaround on the European markets may reduce cyclical risks, although changing tenant and investor needs remain a challenge, especially in the office market.
Looking at the macroeconomic trends that determine the performance of the commercial property segments, 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 also rose, and vacancy rates in the retail segment improved, both in rural areas and in shopping centres in Budapest. In 2025, additional consumption growth may be a growth driver, supported by government measures as well as rising real wages.
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. Rental demand in the industrial-logistics market in Budapest and its environs was positive in 2024 Q4, but 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 office and industrial-logistics markets. The volume of office space currently under construction includes a high proportion of owner-occupied office buildings, mainly for public sector use, which results in a favourable average pre-lease level for developments, but relocations are freeing up space currently in use, leading to rising vacancy rates. Therefore, there is a risk of oversupply even at these pre-lease levels.
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. In contrast to the domestic trend, average investment turnover in the CEE region increased by 69 per cent, while prime office yield levels (on real estate at prime locations and of the highest quality) stagnated. 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. While capital values calculated on the basis of prime office yields and rents in the CEE region fell by half a per cent on average in 2024 and by 3.6 per cent in Budapest, 2024 H2 saw a turnaround in several countries in the region, in conjunction with yields stagnating and rents rising, leading to an increase in office valuations.
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 less than one-half of the post-2008 crisis peak in terms of both balance sheet total and own funds, and the non-performing loan ratio also remained low at 3.7 per cent at end-2024. Due to potentially mounting risks in the CRE market, from July 2024 the MNB’s Financial Stability Board reactivated the Systemic Risk Capital Buffer (SyRB), which was suspended for an indefinite period following the outbreak of the Covid-19 pandemic, in a revised form for preventive purposes.