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According to Valter Kalaus, Managing Partner of NEWMARK VLK HUNGARY, the Hungarian real estate market is going through an exciting period: the significance of home office is decreasing, while barely any cranes are in operation across the capital. In a few years, there could be a shortage of modern office buildings, yet many tenants are hesitant to commit even in the medium term. What will happen to outdated buildings? What can we expect in the previously booming warehouse market? And how can we make the right decisions even in an uncertain economic environment? Among many other topics, we discussed these pressing questions.

• As a tenant representative, you are well-acquainted with both the office and industrial markets. Let’s start with the office sector! Vacancy rates vary by submarket but are steadily increasing. However, all industry players agree that this is a normal cyclical pattern in the office market—far from a crisis. We’ve seen this before, and we will see it again. What is your take on this?
• I fully agree with this perspective; I don’t see a dramatic situation. Compared to the pre-COVID era, when the market was thriving, many things have changed. Initially, the downturn was attributed to the pandemic, and now we are witnessing another phase of market adjustment. The reality is that very few new office developments are underway, meaning there is less new supply, while a significant amount of space remains vacant. That said, until the vacancy rate reaches 20%, there is no major issue. A 10-12% vacancy rate is still considered healthy, though the current 15% is slightly higher than ideal. However, it is crucial to examine what type of space remains unoccupied.

• I assume it’s not the brand-new buildings, considering there are very few of them?
• Even if a company wanted to move into a new office, they wouldn’t be able to before the second half of the year. Projects like CenterPoint 3 and Corvin Innovation Campus Phase 2 are still under construction, and the second phase of Skanska’s H2O development has just begun. Meanwhile, older, depreciated buildings are becoming less attractive. The bigger picture shows that relocation activity is low, with two-thirds of transactions being lease renewals or extensions. Overall, companies are hesitant to move, and in many cases, there aren’t many viable alternatives.
• Many leases signed before COVID are now expiring. Do you think companies are holding back due to uncertainty?
• COVID has changed office usage patterns, but now we see that leading global companies are making efforts to bring employees back into the office and reduce the prevalence of remote work. While there’s no radical shift, employers who previously required two office days per week are now moving to three, and those with three days are pushing for four.
• Is this an alignment with former President Trump’s “return to the office” directive?
• This trend started before that. It represents a significant change and raises several challenges. Many young professionals entered the workforce during the pandemic and started their careers in remote settings. They never experienced daily office life and are often reluctant to adopt it.
• Landlords and office owners, of course, prefer full-time office presence.
• Tenants and their employees expect high-quality amenities in office buildings, such as good cafeterias with reasonable prices. However, if offices are nearly empty on Mondays and Fridays, the remaining three days of lunch traffic between 11 AM and 2 PM must sustain the business. The same applies to other service providers within office buildings, making business planning highly unpredictable.
• From an employer’s perspective, why is full-time office presence beneficial?
• The rise of remote work has had negative HR implications. Young employees, who already have lower loyalty levels, struggle with in-person communication, don’t prioritize workplace affiliation, and often lack a sense of belonging. If they only work remotely with a laptop and phone, the employer itself becomes irrelevant. If a competitor offers just 10% more in salary, why wouldn’t they switch? Without in-person interactions, coffee breaks, casual conversations, or shared experiences, there’s no emotional attachment to the company. HR professionals recognize this issue—decreased retention leads to higher turnover, reducing efficiency and increasing costs.

• Previously, the industry standard was a five-year lease term.
• Forecasting five years ahead is challenging now, and there’s no guarantee that an office chosen today will still be the right fit in three years. The more flexibility a landlord offers—both in terms of lease duration and space adjustments—the more likely they are to retain tenants.
• Isn’t this where serviced offices come into play? They offer maximum flexibility and are gaining market share.
• Serviced offices are indeed a great solution for short-term needs, such as project-based work or for startups experiencing rapid growth. However, I see their ideal usage period as being up to one year. If a company needs an immediate workspace, a serviced office allows them to start operations within days. We even tested this ourselves—during a minor renovation of our Váci út office, we relocated to a serviced office for two weeks.
• Did it work out? What were your impressions?
• While the provider did their best to accommodate us, we found it less appealing. Sharing with “strangers” reception, meeting rooms, kitchens, and printers was inconvenient. Beyond privacy concerns, for some companies, security risks arise from not knowing the rotating mix of neighboring tenants. Still, for short-term needs, serviced offices can be a viable solution, provided one is willing to pay higher fees for the convenience.
• Several government agencies are set to move into new developments in Zugló, Dürer Quarter, and Budapart. What impact will this have on the real estate market?
• They will vacate numerous outdated buildings in dire need of renovation. Depending on the property, the fit-out costs could range from €600 to €800 per square meter. To justify these investments, landlords would have to charge rents comparable to new developments, which the market may not accept. In many cases, converting these buildings into residential units, hotels, or student housing could be a more viable option.
• How do you see the industrial real estate sector? Is it still more stable and profitable than the office market?
• Before COVID, this sector was lagging, but it became one of the biggest winners during the pandemic due to the shift toward e-commerce. The demand for logistic hubs surged, driving a development boom. Although the initial frenzy has subsided, the industrial market remains attractive to investors. The expansion of automotive plants and suppliers outside Budapest is also creating new industrial hubs, reducing the market’s previous capital-centric nature. I anticipate continued healthy growth in this sector.
• As an investment advisor, what do you currently recommend to your clients?
• It depends on factors like budget, risk tolerance, and investment horizon. Beyond industrial real estate, well-located A-class office buildings still hold strong potential. Additionally, I see promise in strip malls, which gained popularity during COVID, and the hotel market, which continues to perform well.
• Looking Ahead – So, would you say you’re optimistic?
• Businesses will always need real estate, and there will always be tailored solutions for each company’s needs. The office market is undergoing an intriguing transformation—modernization, potential repurposing, and shifting workplace dynamics. However, opportunities still exist, and 2025 will present numerous possibilities for informed decision-making. Many hidden options are out there, waiting to be uncovered by the right expertise. That’s exactly what we do.