Hungary’s office market faces oversupply while retail and hotel demand show promising signs for 2025

Hungary’s commercial real estate market is grappling with challenges as transaction volumes dwindle and foreclosures rise, driven by high interest rates and elevated yield expectations. However, experts at BDO Corporate Finance forecast a turnaround in 2025, with varied trajectories across market segments.

“The industrial-logistics, office, retail, and hotel sectors are all facing unique challenges and opportunities. Flexibility will be essential for investors as each segment offers different growth prospects,” said Viktor Máté, Director of Real Estate Advisory at BDO Corporate Finance.

Market Segments at a Crossroads

The industrial-logistics sector is poised for further expansion, with 340,000 square meters of new space set to be delivered by year-end, particularly in Budapest and other major cities. However, this rapid growth brings the risk of oversupply, potentially driving vacancy rates higher. Investors are advised to carefully track rental trends and demand for new developments.

The Budapest office market is facing a vacancy rate projected to reach 15% by the end of 2024. The enduring impact of remote and hybrid work models has led tenants to reevaluate their space requirements, stabilizing or even reducing rental prices.

In contrast, the retail sector is showing signs of recovery. As consumer confidence improves, so does demand for traditional retail spaces, with vacancy rates stabilizing and even trending downward.

The hotel market is also rebounding strongly. The number of foreign guests has surged, with nearly as many overnight stays recorded in the first eight months of 2024 as in pre-pandemic years. While some hotel projects may face delays, the sector’s long-term outlook remains positive, bolstered by improving occupancy rates and steady tourism growth.

BDO Expands into Real Estate Advisory

Responding to these evolving market conditions, BDO Corporate Finance has launched a new real estate advisory service aimed at addressing the complexities of the current landscape.

“Market conditions today demand a comprehensive approach to real estate transactions, utilization, and development,” said Viktor Máté. “Our advisory service is designed to provide clients with tailored solutions across all segments of the real estate market, leveraging financial, technical, and industry expertise.”

The new service, led by Máté and supported by veteran real estate expert Attila Szegedi, positions BDO as a unique player in Hungary’s market. With nearly two decades of combined experience, the team is well-equipped to guide clients through investment strategies, property development, and market utilization.

Looking Ahead to 2025

While 2024 has brought challenges, the forecast for 2025 points to opportunities for recovery and growth in Hungary’s commercial real estate market. Retail and hotel segments are expected to lead the rebound, while industrial-logistics and office markets may require cautious navigation amid oversupply risks.

With its new real estate advisory division, BDO Corporate Finance aims to help market participants capitalize on these opportunities and adapt to the shifting landscape, setting the stage for a more dynamic and resilient sector in the year ahead.

Source: BDO Corporate Finance