BACKGROUND INFO
Miklós Gyertyánfy is the chief operating offcer of Gránit Pólus. He has been part of the group’s management ffor the past 10 years and was previously the asset management director. He graduated from the Corvinus University of Budapest with a degree in fnance and studied in Canada and the Netherlands. He started his professional career at a U.S. private equity fund in Budapest and Warsaw, after which he worked for nine years in the telecoms and internet industries. He earned a Chartered Financial Analyst (CFA) designation and is a Royal Institution of Chartered Surveyors (MRICS) member. Gyertyánfy is married with two children. His hobbies include hiking, playing soccer, and flying as a light aircraft pilot.
WHAT IS THE MOST PRESSING CONCERN FOR THE INDUSTRY IN 2024?
The market is still under pressure from the higher interest rates and diffculty in access to capital. The low transaction volumes in all asset classes manifest this. Stakeholders still need to adapt fully to the new market realities. Regarding the different asset classes, we believe we have not yet gotten through the worst in the offce market. On the other hand, we see a slowly improving picture on the retail side, driven chiefly by the expectations of increasing retail spending, mainly in physical retail, in Hungary in 2024.
“Retail development is more likely on a smaller scale in the form of strip malls, mixed-use schemes and the expansion of existing retail locations. We don’t expect another signifcant mall in the next 5-10 years.”
WHAT WILL BE THE MOST PRESSING CONCERN IN FIVE YEARS?
I believe it is ESG compliance and the effects of artifcial intelligence. Pressure for sustainability is going to increase both from the regulatory and fnancing side towards the property owners to improve their buildings to keep on track with the sustainability roadmap. This will require substantial investments during a time which is anyway burdened by the already mentioned adaptation to the new fnancing realities as well as the post-covid re-balancing of the offce market. AI is unfolding at an unprecedented speed, and no one can tell yet what will be its effects on how we will use our buildings for working, shopping and living in the future. Certainly, changes will be substantial and real estate market players must increase their flexibility and digital skills to be prepared.
THE GOVERNMENT HAS ANNOUNCED A TWO-YEAR EXTENSION OF THE 5% VAT RATE FOR NEW HOME BUILDING. WHAT SORT OF GOVERNMENT SUPPORT DOES THE COMMERCIAL SECTOR NEED?
In general, I believe that a less regulated real estate market, even at the price of fewer government support schemes, would contribute more to development. More regular negotiation forums and discussion mechanisms between the different stakeholders (government, municipalities and market players) would also largely help. There are, however, areas that require government support and intervention, like the refurbishment of ineffcient and outdated residential buildings. As for the VAT for new home buildings, the 5% rate is essential: Hungary is still lagging in what would be a healthy renewal rate of housing stock.
IS REAL ESTATE ON COURSE TO HIT EU AND HUNGARIAN ESG TARGETS? HOW DO YOU SEE THIS TREND DEVELOPING?
Despite all the challenges, I believe that the commercial real estate sector will meet the requirements. Major market players have all had their own ESG agenda for years. In our case, Westend has recently signed a long-term Power Purchase Agreement with
a newly developed solar power plant to purchase most of its energy needs from green sources. With this, we are getting close to our long-term carbon emission reduction targets.
GIVEN THE GROWTH OF HOME OFFICE EXPECTATIONS, WHAT DO YOU SEE AS THE FUTURE OF THE OFFICE BUILDING?
Though we see diffcult times in the short term, offce buildings will stay with us for the long term. The number of home offce days at international frms was estimated at 1-2 days per week on average about a year ago. However, more recent news suggests that it may be smaller today and might be reduced further. We think the highly negative sentiment of investors towards the offce sector will turn again as the market finds its new balance. But it will undoubtedly be different than before. We expect offces to be more flexible and require fewer fit-out works in the future, which would also match the ESG goals. In our case, we work on better combining Westend Offces with other functions of the building complex, including integration with retail space, hospitality functions and short-term offce leases, meaning a move from the traditional long-term offce lease model towards alternative usage types.
WHAT DO YOU SEE AS THE FUTURE FOR RETAIL DEVELOPMENT IN HUNGARY? WILL THERE BE ANOTHER MALL IN THE NEXT 5-10 YEARS?
Retail is already back on the preference list of investors and developers on a global level. However, in Hungary, the “plaza-stop” regulation signifcantly constrains new developments, which generates challenges for retail tenants in their expansion plans, especially in more attractive cities and locations. Retail development is more likely on a smaller scale in the form of strip malls, mixed-use schemes and the expansion of existing retail locations. We don’t expect another signifcant mall in the next 5-10 years.