Commercial Property Investments in Hungary: Things are Looking up

The Hungarian real estate market is on the rise, which is especially true of the commercial property market in Budapest. In most sectors, the demand is bigger than the supply, which lets asset owners decide whether they want to hold onto their real estate and make a profit on the rent or select the highest bidder and cash in. 

Whether you are interested in the office, industrial, retail, or hotel sector, you will surely find attractive property investment opportunities in Hungary, and you can reasonably expect a nice return on your investment.

Office Spaces

The average vacancy rate of modern office spaces in Budapest is currently below 7%, which is incredibly low. This rate is due to the constant growth of local businesses and the expansion of foreign businesses to the EU (this is also encouraged by the quick and easy work permit procedures in Hungary compared to many EU member states). Another factor is the low volume of new construction project completions. Over the next couple of years, however, a large volume of office space is expected to be completed, which will undoubtedly boost the vacancy rate, but it will still not significantly lower rents or damage the value of your investment.

The modern, “class A” development projects attract a wide range of foreign investors. Competition between Hungarian and international capital is expected to increase as many foreigners are setting up companies in Hungary, especially as they are often already involved in the construction (and of course, the design) of the new office buildings. In the long run, they can save money on operating an office building that is tailored to their exact needs. Many international companies realize these projects on a lease base, keeping the venture cost-effective throughout the whole process.

Industrial Real Estate

Regarding industrial and logistics properties, again we can see a vacancy rate of a historic low at around just 2%, which is the lowest in Central Europe. Together with the strong demand and tax benefits in Hungary, the scene has been deemed ideal for investment by leading industrial developers undertaking speculative development projects. 

New capacities are being constructed especially in the outskirts or the closest vicinity of the Hungarian capital, many of which are already preleased. However, thanks to the large volume of logistics properties under construction, you have a reasonable chance of striking a good deal if you are looking for facilities in this sector.

Hotels in Budapest

Budapest, with its lively cultural scene, excellent spas and brilliant architecture, has always been a popular tourist destination. The average occupancy rate over last summer was just below 74%, which is second to only Prague among the capitals of the region. Half of the guests are of domestic origin, while the other half come to Hungary from foreign countries.

The number of hotel rooms is constantly increasing with the completion of new development projects. At the same time, existing capacities are also favored by investors; for example, Hotel Gellért, one of the most prominent hotels in Budapest, standing proud on the bank of the Danube for more than 100 years, has found a new owner just the previous year. 

Retail Real Estate Market

The total volume of retail real estate is somewhat lower than in other countries of the region. About half of it is concentrated in Budapest and the surrounding county. A little less than the total stock is made up of retail warehouses while the rest is shopping centers and retail parks. 

Development projects are mostly outside of Budapest, where currently only one mall is in construction, to be completed later in 2020. This is partly because, after the economic crisis, developers became vary of the level of consumer spending and the expansion of e-commerce. However, currently, shopping malls are operating at full capacity, and there are even waiting lists for prospective tenants.

As you can see, the Hungarian commercial real estate market offers attractive options that promise secure returns on their investments in office spaces, industrial real estate, hospitality, and the retail sector. Whichever sector you are interested in, you must also include a thorough business planning phase to make sure your project is viable, cost-effective and compliant with local regulations, in addition to being lucrative.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.