Office
The most effective pressure on office developers and investors to adopt sustainable business practices and develop ESG-compliant products is seen as the mandatory disclosure obligation, which places a heavy burden on both landlords and tenants, according to Valter Kalaus, managing partner of Newmark VLK Hungary.
The more this drives the behavior of office owners, the easier it will be to assess the ESG compliance of complexes. The EU mandatory disclosure obligations require companies to report on their ESG performance and risks. Evolving technology enabling tracking and reporting is crucial to achieving this.
When it comes to mandatory ESG compliance in EU office markets, Budapest is regarded as being in a relatively favorable position, as a good share of its office infrastructure is only 15 to 20 years old. Some Western European cities are in a more challenging situation than the Hungarian capital due to the number of older buildings that are outdated, from an ESG perspective.
In the current office market, where ESG elements are becoming a basic requirement, landlords face the difficult business choice of repositioning or repurposing, as owners need to examine the commercial feasibility of a given office building in a good location. If a major tenant relocates from an asset, the owner must consider the feasibility of upgrading the building or opting for a change of use. Carrying out an upgrade becomes a more complex process where there are still major tenants in situ.
From the tenant’s perspective, international companies require landlords to comply with mandatory disclosure regulations. ESG features and practices should be integrated into the daily life of an office complex, with efficient PM and FM ensuring the sustainable operation of a complex that could reduce costs by 20%. This includes waste reduction, biophilia, solar energy, electric charging facilities and controlled air conditioning.
Long-term Value
“ESG-related pressures are exerted on all key market players, including landlords, financial backers and endusers, to exercise the traditional goals of risk management and long-term value appreciation through ESG-compliant products,” comments Kalaus. He considers ESG in real estate to be most clearly defined in the “Environmental” aspect, with broad adoption of features and practices by all actors.
Stakeholders typically need to consider three major issues: location, price, and ESG, and also how this impacts the wider population. With regard to location, an office needs to have good public transport connections, car access and electric battery charging facilities.
“This is a team effort, and all market players need to work together with regard to ESG, including financers, developers, constructors, landlords and office operators. Offices will need to provide flexibility, smart systems and an employee-centric environment,” says Kalaus. Sustainability accreditation has become a crucial factor in any successful office project; most of the office deals that Newmark VLK work on involve the requirement and need for an office building that is sustainability accredited.
“I am optimistic regarding the office market in Budapest. Office is a cyclical business, and with an upturn in office development, there will be a growing number of ESG-compliant, quality office developments in Budapest,” Kalaus concludes
To read more visit https://bbj.hu/
