Sustainable investment and development trends and ESG challenges
Experts again converged at EuropaProperty’s CEO Networking Forum, the traditional curtain raiser to the region’s number one awards event, the CRE Awards, on October 19th in Budapest, Hungary. Investment, development and ESG challenges were the main talking points of the discussion.
ESG is a buzzword that in recent months has been everywhere in industry discussions. Hubert Abt from workcloud24 kicked things off with an overview of ESG considerations and whether they hold a central place in investment deliberations.
He stated unequivocally that ESG plays a pivotal role in the operational frameworks of businesses. “The entire real estate industry is undergoing a profound transformation due to impending sustainability legislation, necessitating focused attention, in-depth understanding, and a strategic alignment of business objectives with environmental and social goals. ESG facilitates the identification of potential financial and environmental advantages, fostering the development of decarbonization strategies and roadmaps to minimize carbon footprint.”
During the panel discussion, it was argued that many companies on the tenant side lack a comprehensive understanding of ESG. Hubert Abt explained, “There’s a lot of discussion, but a lack of comprehension. However, there’s a noticeable shift towards emphasizing the social aspect of ESG. Whether it’s commercial real estate investors, developers, or tenants, they all require assistance in implementing ESG solutions that align with their objectives.”
Speakers unanimously concurred that profitability is intertwined with sustainability, emphasizing that the age-old adage “location, location, location” still holds true. Hubert Abt pointed out, “All asset classes face similar challenges. Forward-thinking entities adapt and redefine project purposes. This holds true for every asset class. ESG is driven by country, not sector. The challenge lies not in new construction but in addressing old stock and transformation risks.”
Addressing investment trends and development projections, Csaba Zeley, Managing Director of ConvergenCE, discussed the atmosphere in the Budapest office market. “The current market conditions are favourable, and I anticipate even better prospects next year. Ensuring a seamless tenant experience without uncertainties is now crucial in today’s market. We are consistently seeking opportunities to enhance our services.”
Valter Kalaus, Managing Director of Newmark, added, “Though we have faced challenging times before, I remain optimistic about the future. Perhaps not in the coming year, but by 2025. Zsolt Berenyi from GTC shared this optimism, stating, “Companies are advancing with development, and I am confident in a market rebound. Opportunities are present now.”
On the industrial front, David Huszlicska, Managing Partner of Greenfield Development, observed a shift in tenants toward new stock. He noted, “Industrial real estate has long been a sought-after investment, and its market position continues to strengthen. Modern A-class warehouses that align with ESG requirements are in high demand. Investors are actively seeking to increase their exposure to high-quality assets in promising locations.”
Petar Orlic, Partner at NKO Partners, predicted, “ESG compliance will become mandatory for banks considering lending. While companies currently exhibit reluctance to invest in ESG, there is a growing awareness of the need for change. I believe that in two to three years, everyone will share the same level of awareness.”
Panellists agreed that not all companies share identical ESG agendas, emphasizing the need to trace the financial trail back to its origin for meaningful insights. Bálint Bartha-Horváth from CBRE concluded, “The range of ESG commitment varies widely. For some, it’s about doing the minimum to achieve ESG. There is not a significant push to renovate buildings, and there is scepticism about the ESG compliance of all new construction.”
