Although there is little risk of oversupply in the Budapest office market with restrained delivery in recent years, a reconsideration of working habits and time spent in the office raises questions as to the amount of demand there will be to meet supply from existing and shceduled development projects in the post – COVID environment.

This uncertainty means substantial preleases are now required before the construction of a project can be undertaken. At the same time, developers and owners are having to redesign offices to meet changing specifications driven by tenant demand and sustainability regulations.

“The office as a place of work will change: lounge -type interiors will prevail, there will be even more space for collaborative work, and the number of mixed office buildings will rise (normal plus serviced offices under the same roof),” comments Valter Kalaus, Managing Partner at Newmark VLK Hungary. 

To read the full article click on the following link: https://bbj.hu/shop/real-estate-review-2022

Valter Kalaus views on sustainability questions:

How do you define sustainability with regard to the climate crisis and tenant specification requirements?

Using „green” methods is only one of the many aspects to reach sustainability. Stakeholders should present a proper roadmap to minimize the carbon footprint of the building.

How are sustainability accreditations systems moving beyond the office and industrial sectors?

Office: developing smoothly, some big tenants dedicate special staff to deal with, board awareness is rising

Industrial: only a handful of companies devote special attention to sustainability but those who do, can make others to follow

What criteria and priorities need to be added to third party sustainability systems?

– reliable

– relatively cheap

– transparent

– simple to use

– no need to hire to much staff to manage

What impact will sustainability have on the role of architects and interior designers?

– design is a secondary aspect compared to materials of office furniture and amenities

– 2 in 1 approach to elements of interior design: variable furniture’s, lights

– more space and special appearance forms for greenery

How will the office change as a place of work?

– lounge-type interiors will prevail

– even more space for collaborative work

– number of mixed office buildings will rise (normal + serviced offices under the same roof)

Should and how should RE projects be required to improve to the look and feel of the city

– local government (at different level, eg: districts, City) should be involved from the very beginning

– size is not the first priority

– adjustment to NGO’s needs on a daily basis (otherwise protest may harm the project)

Is sustainability accreditation a pre-requisite for investors in making an acquisition or is it the case that investment grade assets are usually accredited in any case?

– solid investors will require sustainability accreditation in each and every case

– percentage of non accredited assets is decreasing

The letting and investment deals concluded during 2021 reflect the positive positions of the office and industrial sectors and the favorable prospects for the hotel sector, despite a difficult period given the various lockdowns. Questions remain, however, over the medium- to longer-term position of retail. Sustainability accreditation and ESG matters are playing an increasingly prominent role in both the development and investment markets.

Office Overview

The office sector accounted for 80% of investment activity in the first half of the year, according to consultancy Avison Young Hungary. The CEE developer and investor GTC has invested EUR 160 million to acquire the LEED “Gold” accredited 20,000 sqm Ericsson headquarters and the 21,500 sqm Evosoft HQ in South Buda, both from Wing.

The transaction fits in with the aim of Wing to become a regional player as it focuses its activity on development and investment in CEE, partly through its Polish subsidiary, Echo lnvestment. GTC also acquired the 15,500 sqm Váci Greens Building D, developed by Atenor and sold to a Hungarian private investor. “GTC’s very strong ‘all-out attack’ is very interesting: Their purchase of the Infopark buildings from Wing, the purchase of two buildings in the Váci Corridor (Váci Greens D and Váci 188), and the only Class ‘A’ quality larger office building in Debrecen, Forum Offices, will make it an extremely strong player on the office market,” comments Valter Kalaus, managing director of Newmark VLK Hungary.

The largest single asset transaction of the year was the purchase of Váci Greens F by a domestic closed-end fund from Atenor, after a prolonged process that carried over from 2020. Another investment transaction of note was the acquisition of the earlier generation
BC 140 by the U.K. investor Resolution Property from German asset manager DWS. This is the third office purchase by Resolution Property after acquiring the Margit Palace and Buda Square buildings, totaling 37,000 sqm, from Adventum.

ln an unrelated transaction, CBRE represented Wing in the disposal of four office towers at Infopark, representing 49,000 sqm, to Sky Green Buildings.

ln a regional transaction of note, the Hungarian investor, Indotek Group, announced it is to purchase GTC’s Belgrade office portfolio for EU R 267.6 mln. The agreement covers 11 buildings within five business parks and a total of 122,000 sqm of space. Once completed, the deal will become one of the most significant real estate transactions in the last five years on the CEE market, according to analysts.

To read the full article visit BBJ page https://bbj.hu/ – for the Dec 17 Magazine edition

The office market faces challenges regarding financing, demand, pre-leasing requirements, tenant specification, staff requirements, and, not least, working habits for the post-pandemic era. Although most pipeline projects will go ahead, a fall in new speculative project development is expected.

“Office developers must adjust to the market changes such as increased costs in the construction sector, a large amount of uncertainty in the office market with limited pre-leases, and different space usage requirements, but there is no need to redesign the strategy completely,” commented Valter Kalaus, managing director of Newmark VLK Hungary.

“New office projects are being considered, however, in a very careful way; not many developers will move forward with speculative developments. Having a large anchor tenant has always been a big boost for office projects, but now it seems like it will be the key to getting started,” Kalaus says.