Hungary's Real Estate Market to Depend on Green Technologies and Energy Efficiency

Hungary’s real estate sector is set to experience investment growth in 2025, yet industry players will need to integrate ESG (Environmental, Social, and Governance) principles across all stages of development and management. This shift will add complexity to operations, requiring developers and investors to meet stringent sustainability standards, according to a Budapest Business Journal report.

New construction projects and refurbishments across all sectors—industrial, hospitality, and residential—must comply with increasingly rigorous environmental regulations and evolving market sustainability demands. While demand remains high in these segments, speculative development in the office and retail sectors is expected to remain constrained.

Investment Outlook

Investment activity in Bulgaria, Czechia, Hungary, Poland, Romania, and Slovakia is showing signs of recovery. Colliers has revised its 2024 investment forecast for Central and Eastern Europe (CEE) upwards to €7–7.5 billion, although this remains 30% below the ten-year average.

Colliers analysts anticipate a European Central Bank (ECB) rate cut and lower financing costs, potentially driving greater investor activity in the second half of 2025. Yield levels are expected to remain stable, while prime asset yields in Budapest stand at approximately 7% across office, industrial, and logistics sectors.

With current market conditions, Colliers estimates that regional investment volumes in 2025 could exceed €10 billion. Investment momentum is building in Poland and Czechia, but Hungary's market recovery remains uncertain.

CBRE projects total CEE investment volumes for 2024 to reach €9.5 billion, with approximately 50% of capital inflows directed toward Poland. Several transactions are nearing completion and are expected to close in 2025. However, in Hungary, investors remain cautious, sellers are less active, and pricing remains subdued.

Silviu Pop, Colliers’ Head of Research for CEE and Romania, maintains an optimistic view for the real estate market but highlights the sector’s exposure to external macroeconomic risks and volatility in key trading partners.

“CEE’s economic growth, particularly in contrast to Germany’s recession, along with price stabilization and the return of institutional capital, suggests more favorable conditions through 2026. Currently, transactions are focused on value-add and opportunistic strategies, particularly in sectors where pricing has adjusted.”
— Silviu Pop, Colliers

A notable pricing gap remains, especially in the logistics sector. While optimism is growing for 2025, expectations for ECB rate cuts will be a key driver of market activity.

Office Market Trends

Attila Madler, CPI Hungary’s Asset Management Director, does not foresee speculative office construction in 2025. Instead, projects with a high level of pre-leasing (above 70%) are expected to move forward. Corporate tenants are adopting cost-saving strategies, reluctant to pay €22 per sqm/month for new buildings when existing offices are available for €16-17.

CBRE forecasts that 100,000 sqm of office space will be delivered in Budapest in 2025, with an additional 256,000 sqm scheduled for 2026. The pre-lease rate exceeds 90%, indicating selective but strong demand.

“The office market in CEE has not been this weak in 20 years.”
— CBRE

Walter Kalaus, Managing Partner at Newmark VLK Hungary, predicts that Budapest’s office vacancy rate could reach 15% by mid-2025, as long-term impacts of remote and hybrid work reshape tenant demands. Many firms are reassessing their space needs, which could further stabilize or lower rents.

“The office sector is adapting to shifting demand; new developments are at historic lows. Vacancy rates will continue rising, but well-located, ESG-compliant properties remain attractive. Redevelopment and repurposing strategies may become essential.”
— Colliers

Green certifications and energy efficiency will become increasingly critical investment considerations. Noah Steinberg, Chairman and CEO of Wing, asserts that ESG-driven renovations and flexible workspace designs will define the next wave of office development.

“Failure to adapt could leave some buildings obsolete. With tenants and investors prioritizing certified green buildings, regulatory incentives—or penalties—may drive market behavior.”
— Zsombor Barta, Ambassador for the Hungarian Green Building Council (HuGBC)

Industrial & Logistics Expansion

CBRE anticipates 640,000 sqm of new industrial space in Hungary this year, with 220,000 sqm already under construction. Foreign direct investment (FDI) is driving demand, particularly for industrial and logistics facilities, with automotive giants like BMW, BYD, and CATL expanding their presence.

Ferenc Gondi, Managing Director at CTP Hungary, sees rising demand in Hungary’s regional markets, particularly in the south. Developers are focusing on energy-efficient buildings and renewable energy integration to meet sustainability targets.

“Manufacturing and supply chain investments are shifting development activity toward regional hubs, where build-to-suit (BTS) models are becoming more prevalent.”
— Walter Kalaus, VLK Newmark

Colliers projects 700,000 sqm of new industrial space for 2025, including 390,000 sqm in Budapest and 300,000 sqm in regional cities. Blanka Vackova, Head of Research at iO Partners (Czechia), notes that speculative construction accounts for 44% of CEE’s development pipeline, with Hungary closely mirroring the regional average.

To remain competitive, industrial developers must integrate sustainability features as a standard, particularly in cross-border logistics hubs. Green financing could prove a game-changer, promoting the adoption of renewable energy and smart technology. Without these advancements, Hungary risks losing its position as a regional logistics hub.

Retail & Hospitality Developments

The retail sector remains sluggish, with few new shopping centers expected beyond rural standalone retail projects. Many retail properties lack ESG compliance, raising operating costs and lowering investor appeal.

To stay relevant, retail developers must prioritize diversification—combining shopping, entertainment, and community spaces. Green certifications and energy retrofits will be key, ensuring older properties remain attractive.

Hungary’s hospitality sector continues to be a magnet for investment, with visitor numbers rebounding to pre-pandemic levels. CBRE forecasts 1,500 new hotel rooms in 2024, including 1,200 in Budapest. Lake Balaton will see an additional 700 rooms by 2027, including Le Meridien Resort.

“Sustainable technology—such as geothermal heating and water recycling—will become essential for hotels. Eco-friendly properties will attract both environmentally conscious travelers and institutional investors.”
— Máté Szoboszlay, Partner at Faedra Group

ESG: A Defining Factor in 2025

While ESG compliance remains voluntary in Hungary, the trend is accelerating, particularly in Northern Europe and Germany, where sustainability is already a requirement for investment decisions.

In practice, developers who fail to integrate ESG principles may face difficulties in securing capital and could struggle with asset leasing or sales in the future.

ESG will continue shaping Hungary’s real estate market in 2025, influencing investment decisions, tenant preferences, and regulatory frameworks. Experts highlight three key challenges:
- Modernization gaps: Upgrading outdated properties will require strong financial incentives and technical support.
- Green financing: Sustainable funding mechanisms will be crucial, especially in industrial and residential sectors.
- Policy alignment: A clear regulatory framework and market incentives will be essential for transitioning toward net-zero carbon emissions.

Hungary’s real estate sector holds vast potential, but to meet future sustainability demands, collaboration among developers, investors, and regulators will be necessary. Those who innovate and adapt will thrive, while those who resist change risk obsolescence in a rapidly evolving market.