The commercial real estate market is on the verge of recovery – MNB is confident

At a press conference in Budapest, Tamás Nagy, the MNB’s director responsible for financial stability and central bank tools, emphasized that although the circumstances were unfavorable, positive changes were already visible by the end of last year, as the performance of the Hungarian economy gradually improved. However, the continuation largely depends on how quickly and to what extent the domestic industry can strengthen, but bank financing conditions are not expected to tighten.

The situation in the office market is uncertain for now, as hybrid working has become a permanent part of operations. Office vacancy rates could reach 15 percent this year, but this is not yet considered a critical level. The picture is more positive in the industrial-logistics segment: although the weakness of European industry is affecting the market, investments have risen to a record level, and vacancy rates have fallen below 8 percent last year.

Accommodation investments are supported by the recovery in tourism: in 2024, guest traffic reached pre-pandemic levels, and hotel revenues increased by 17 percent. According to the MNB, the outlook for 2025 is also favorable, which may give impetus to new hotel projects.

Although the volume of domestic commercial real estate investments decreased to EUR 400 million in 2024 – 28 percent below the 2023 level –, the activity of domestic investors was decisive, with a 73 percent share. Foreign capital continues to come mainly from the United Kingdom, Germany and China. According to the central bank, a greater involvement of foreign capital would be essential for a significant recovery.

It is a positive development that the decline in the valuation of commercial real estate has stopped, regional markets appear to be stabilizing, lending volumes are increasing, and the portfolio quality of project loans is adequate: the ratio of non-performing loans decreased to 3.7 percent in Hungary by the end of 2024.