Navigating the Transformative Landscape of Real Estate Development: A Conversation with Norbert Schőmer MRICS
Real estate development stands as a marathon endeavor, marked by unpredictable outcomes, particularly amidst the complexities of the current global landscape. In a recent discussion with Property Forum, Norbert Schőmer MRICS, the Country Director at Atenor Hungary, and the newly appointed Chairman of RICS in Hungary, shed light on various pertinent issues such as ESG considerations, shifts within the office market, the pursuit of affordable housing, and the pivotal role of education. Moreover, he provided insights into Atenor’s ongoing projects in Hungary while outlining his agenda as the Chairman of RICS.
Embracing his newfound role as Chairman of RICS in Hungary, Schőmer underscores the weighty responsibility and privilege it entails. In a world beset by economic, political, and environmental uncertainties, the pursuit of sustainability emerges as a paramount concern. Amidst the throes of transformation, the real estate industry grapples with the imperative to mitigate pollution and chart a course toward sustainability. Schőmer elucidates that the industry’s evolution transcends mere product creation, extending to the usage patterns, prevailing demands, and the foresight to anticipate future needs spanning decades or even centuries.
Across the spectrum encompassing office spaces, retail outlets, and logistical hubs, seismic shifts in demand patterns are evident. As custodians of urban development, the industry bears the onus of crafting solutions that are not only intricate but also sustainable, accounting for both environmental and societal repercussions.
The conversation delves into Schőmer’s overarching priorities in navigating the labyrinth of challenges that confront the real estate sector. Foremost among these priorities is the imperative to recalibrate strategies to align with burgeoning sustainability imperatives. Embracing sustainability isn’t merely a moral or regulatory obligation; it’s an economic imperative that underpins the industry’s long-term viability. Schőmer articulates a vision wherein real estate development serves as a catalyst for environmental stewardship, forging a harmonious coexistence between urbanization and ecological preservation.
Moreover, Schőmer underscores the need for proactive engagement with stakeholders to foster a collaborative ecosystem conducive to sustainable urban development. By fostering partnerships with governmental bodies, regulatory agencies, and community stakeholders, the industry can leverage collective expertise to navigate the multifaceted challenges on the horizon.
The discussion further pivots towards the evolving dynamics within the office market, which stand as a microcosm of broader socio-economic trends. The advent of remote work, propelled by technological advancements and the exigencies of the pandemic, has catalyzed a reevaluation of traditional office paradigms. The office is no longer confined to a physical space; it embodies a fluid concept that transcends geographical boundaries.
In response to these shifts, real estate developers are tasked with reimagining office spaces as collaborative hubs that foster innovation, creativity, and employee well-being. The emphasis on flexible work arrangements, coupled with the integration of cutting-edge technologies, underscores the imperative to adapt to the evolving needs of the workforce.
Simultaneously, the conversation veers towards the pressing issue of affordable housing, which stands as a linchpin of societal equity and inclusive urban development. Schőmer delineates the challenges inherent in balancing the imperatives of affordability with the exigencies of profitability. While the pursuit of affordable housing remains a moral imperative, it necessitates innovative financing mechanisms and collaborative partnerships to surmount regulatory hurdles and operational constraints.
Education emerges as a salient pillar underpinning the industry’s quest for sustainability and social responsibility. Schőmer advocates for the cultivation of a robust talent pipeline equipped with the requisite skills and acumen to navigate the complexities of the real estate landscape. By fostering interdisciplinary collaboration and investing in lifelong learning initiatives, the industry can nurture a cadre of professionals adept at addressing emergent challenges and seizing opportunities in an ever-evolving milieu.
Against this backdrop, Schőmer offers a glimpse into Atenor’s ongoing projects in Hungary, which epitomize the company’s commitment to innovation, sustainability, and stakeholder engagement. From transformative urban redevelopments to state-of-the-art office complexes, Atenor’s endeavors exemplify a holistic approach to real estate development that transcends mere profit maximization.
As Chairman of RICS in Hungary, Schőmer delineates his vision for leveraging the organization’s platform to catalyze positive change within the real estate industry. By advocating for rigorous standards, ethical conduct, and knowledge dissemination, RICS can serve as a lodestar guiding industry practitioners towards sustainable practices and equitable outcome
The discourse with Norbert Schőmer offers a panoramic view of the multifaceted challenges and opportunities that animate the real estate landscape. Against the backdrop of uncertainty, sustainability emerges as an overarching imperative that underscores the industry’s resilience and capacity for adaptation. Through proactive engagement, collaborative partnerships, and unwavering commitment to ethical conduct, the real estate sector can chart a course towards a more sustainable, inclusive, and prosperous future.
What solutions can RICS offer to address these challenges within the industry?
RICS recognizes the significant role the built environment plays in global carbon emissions, estimated at around 40%. Collaborating with members and stakeholders across various sectors, RICS endeavors to collectively reduce carbon consumption throughout the lifecycle of constructed assets.
The RICS whole-life carbon assessment standard enables the estimation of carbon emissions from early design stages to asset end-of-life. This standard uniquely accounts for embodied, operational, and user carbon, crucial for comprehensive carbon calculations. By illuminating the carbon implications of different design choices, RICS aims to manage carbon budgets effectively, minimize lifetime emissions, and foster a net-zero future for the built environment.
Another pressing challenge in the industry is integrating Environmental, Social, and Governance (ESG) considerations into valuations. Addressing this challenge requires a unified approach to data collection, responsibility, and utilization. RICS has introduced the Data List, comprising 12 indicators for valuers and financial clients to consider during valuations. Recognizing data availability constraints, the “comply or explain” principle allows flexibility in utilizing these indicators.
Additionally, a supplementary list highlights potential future indicators, promoting awareness of emerging trends for inclusion in future updates.
This collaborative effort engages valuation service providers, investors, banks, and other key stakeholders toward a more sustainable, inclusive, and resilient built environment.
Transitioning from standards to day-to-day implementation, you’re employed by a global corporation with a clear ESG (Environmental, Social, and Governance) strategy at the overarching level. How does Atenor, your company, address this crucial topic?
Atenor distinguishes itself by not only constructing environmentally friendly buildings but also funding them through green bonds. Our journey has been one of progression, starting from achieving BREEAM certification and striving to elevate from a ‘Good’ to an ‘Excellent’ rating. In addition to BREEAM, we prioritize WELL certifications for our complexes, reflecting our commitment to environmental sustainability, social responsibility, and promoting equality. Moreover, we’re actively aligning with EU Taxonomy standards, setting an ambitious target to meet 2030 requirements by 2026’s end.
This undertaking is monumental, underscored by the establishment of a dedicated subsidiary within our European operations solely focused on sustainability initiatives. While adhering to corporate standards and regulatory requirements is essential, what truly matters is fostering a collective mindset shift within our workforce and the broader industry. This is where organizations like RICS (Royal Institution of Chartered Surveyors) play a pivotal role. Mere compliance isn’t sufficient; we must cultivate a shared ethos across all market segments towards sustainability and responsible business practices.
To achieve a shift in mentality, it’s essential to foster dialogue among various stakeholders in the market. Is there such a platform in Hungary? Certainly, this is an area where RICS can play a pivotal role.
Unfortunately, there seems to be a lack of robust dialogue on environmental matters among market players and stakeholders in Hungary. There’s a noticeable absence of platforms for effective communication, particularly concerning long-term environmental planning.
The absence of coordination and shared sustainability objectives among developers is evident. While approximately 80% of developers acknowledge the need to adhere to standards such as BREEAM or the EU Taxonomy, their efforts remain fragmented, lacking a unified approach. RICS could play a significant role in remedying this situation.
Turning our focus to the office market, where your expertise lies, Budapest has witnessed minimal development activity. Despite this, there remains some demand. How do you interpret this?
Undoubtedly, there has been a considerable decline in demand, attributable not only to the effects of COVID-19 but also to evolving work practices and transportation challenges. However, over the past 10-12 months, there has been a realization within the market that office spaces are still essential. Some companies that previously abandoned their office spaces now recognize the need for a physical location to inspire and bring together their teams.
This represents a shift in demand compared to five years ago, emphasizing quality over quantity. While the quantity of demand may have decreased, the quality has increased. Notably, rental rates for prime office projects in Budapest and globally have remained stable, indicating that companies prioritizing the office as a hub for team collaboration and motivation are willing to invest accordingly.
Considering this perspective, do you perceive a potential for rental growth?
Indeed, I do foresee an opportunity for rental growth, albeit at a gradual pace. As the economy expands, it’s plausible that prime rental rates will follow suit. However, it’s crucial to acknowledge the current dynamics of the Budapest office market, which spans 4.3 million square meters with a concerning vacancy rate ranging from 13% to 16%.
An examination of the market reveals a stark contrast: premium properties boast vacancy rates as low as 6% to 8%, while lower-grade suburban markets struggle with rates as high as 30%. Addressing the surplus in less desirable properties demands innovative solutions, potentially involving repurposing them for residential, hospitality, educational, medical, or technical use. It’s perplexing that even the least occupied office building in Budapest surpasses the quality standards of many essential institutions. This incongruity prompts reflection on how society allocates resources, urging both regulators and private entities to address this imbalance.
Could you provide an update on Atenor’s ongoing office projects in Budapest and its future plans?
Certainly. We are currently finalizing the first phase of our BakerStreet project, the E.ON headquarters, spanning 16,000 square meters and fully leased to a single tenant. Concurrently, phase two, covering 20,000 square meters, has secured a building permit and is undergoing refinement to meet EU Taxonomy standards. Construction is slated to commence pending market conditions.
Additionally, our Arena Business Campus, initiated over three years ago, has seen the completion of one building, with only 35% occupancy. This presents an opportunity for organizations seeking modern office spaces. Meanwhile, we’re exploring new ventures.
Our flagship endeavor is Lake 11, a sustainable residential development garnering significant traction in the Hungarian market. Spread across 16 plots, we plan to construct 900 apartments complemented by various amenities, including playgrounds, running tracks, and kindergartens. Currently, we’re progressing with the first phase comprising 265 units, with half already sold. Handovers are scheduled to commence in the summer, with completion anticipated by year-end.
In the realm of residential real estate, the topic of affordable housing has garnered widespread attention across Europe, yet Hungary has remained relatively silent on the matter. What steps do you believe should be taken next in this regard?
Rental apartment complexes have gained popularity among both tenants and investors in various Western European nations. However, this approach has yet to gain traction in Central and Eastern Europe (CEE), except for recent legislative changes in Poland. Nonetheless, I anticipate a shift towards this model locally, as it represents a civilized method for enhancing social mobility and urban development. From an ESG (Environmental, Social, and Governance) standpoint, affordable housing is undeniably a social (S) and governance (G) issue, necessitating clear and objective regulation.
In Hungary, the concept of social housing has been largely neglected in past decades, with only a handful of municipal initiatives and trials. Yet, social housing has the potential to generate significant demand in the residential sector, playing a crucial role in society. Developers would greatly benefit from well-defined and encouraging legislation in this area.
Another aspect worth discussing is the intersection of education and real estate as a profession. Few young individuals actively aspire to pursue careers in real estate; instead, it often becomes a default choice. How can organizations like RICS (Royal Institution of Chartered Surveyors) and the industry as a whole make this profession more appealing to the younger generation?
The technical and engineering education in CEE countries is robust, while business and economic education primarily originate from Western Europe. The fusion of these two educational systems equips individuals with comprehensive knowledge of the property industry. RICS caters to expertise in both realms, offering a unique opportunity for professionals.
For me personally, real estate provided a perfect blend of my architectural background and economic qualifications. However, it’s important to acknowledge the demanding nature of this field, particularly in development. Success often requires years of dedicated effort on projects before tangible results emerge.
I would encourage aspiring professionals to enter the real estate sector only if they are prepared to commit to long-term project endeavors. Despite the challenges, the satisfaction of contributing to the built environment, as I have experienced in Budapest, makes it all worthwhile.
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