As the office market faces the potential of changes demanded by the post-COVID environment, Budapest must also deal with challenges over demand and supply, developing expectations from tenants, and the sourcing of plots in emerging districts of the city. Budapest Business Journal real estate editor Gary Morrell has asked local office market professionals how they see the post-pandemic environment and its impact on demand and potential preleases. Will this encourage the undertaking of new office projects, how are office and remote-based working habits seen in the longer term, and what the role of property management and facility management will be in the new environment? Will the role of sustainability accreditation be enhanced, and what are the potential new business districts?

We have already overcome the first hurdle; the market has clarified that offices are needed, they will not go away completely. In the post-pandemic world, companies will need to adapt to the new norm, to have a more balanced split between working from home and working from the office. On-site working will prevail, but the home office will be a more substantial part of our life than before COVID. The office environment remains the primary place to work; however, it will have to adapt to the new norms. The internal configuration of offices will have to adapt as well, as people will use the office for partly different purposes than before. But first, employers will have to gain the full confidence of their people and convince them that the office is a safe place to work.

Valter Kalaus
Managing Partner

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The Budapest Business Journal was saddened to learn on the day our last issue was published that Attila Kovács, founder and managing partner of DVM group and Horizon Development, had died aged just 51. Gary Morrell spoke with market players about the architect and developer’s contribution to real estate in Budapest, his promotion of the city and Hungary, and about the man as a person.

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Valter Kalaus, managing partner, Newmark VLK Hungary

“Horizon Development has proven that quality makes the difference and that visionary concepts are competitive in each market cycle. Attila was the best ambassador possible for the industry and the city. Not only as a role model but more, designing and developing outstanding buildings and landmarks.”

Flexibility and effective change-management have become the number one priority in the office market for the past year since the pandemic reached Hungary and restrictions were enacted.

The office market hasn’t collapsed but it has undergone a significant transformation over the past 12 months, and now the new normal has to be redefined, explained Valter Kalaus the managing director of the consulting firm Newmark VLK Hungary.

‘In the early days, we thought this pandemic wouldn’t last that long, but as time passed by, we’ve realized it can drag on, and we still cannot see the end. Before the pandemic we thought we managed things properly and use appropriate measures, but it turned out that it’s not so obvious. However, both tenants and landlords seem to have recognized the need to redefine what counts as acceptable and normal.’ – he defined the new processes.

Remote working is no longer a rare phenomenon, it has become a common practice across the whole economy. Home office was integrated into the everyday life of companies and everyone tried to find the optimal ratio which suites them.

‘We’ve found that an average company with 100 employees will only want to maintain 60-80 workstations on the long run. In many offices it has become utterly accepted that several people take turns using the same workstation, even within a day.’ – he said, referring to the fact that the secret to success will be the hybrid model in the future.

‘2020 also brought another essential trend for tenants: they had to prioritize creating safe working environments within their offices. While they recognized working from home can be effective, they also changed the perception of working: location-based work has been replaced by productivity-based work, the focus moved to the so-called agile activity.’ – added Valter Kalaus.

The most quoted word on the office market was flexibility last year.

On one hand it meant the rapid adaptation of the new stage for tenants and landlords (or at least the pursuit). On the other hand, that forcing short-term discounts at all costs is not worth it.

‘Asking the landlord for a renewal just to delay their temporary payment problems did not help on tenants being far from their lease expiry. We paid special attention to this as a consulting company. We also saw that tenant requests for flexibility had to be offset by landlords in the same way, as it was essential for both parties to maintain the business. Landlords are doing much more now for their buildings’ safety than ever before. More and more smart buildings and common areas are also managed by contactless solutions. From tenants’ point of view flexibility of lease terms and the size of their office spaces has become predominant today, in many cases it’s already ahead of the rent fee.’ – changes have been revealed by the expert.

The managing director referred to a recent survey, according to which the vast majority of German companies with more than 250 employees are not considering a significant reduction in their office spaces, rather set a goal of restructuring in 2021. This trend can also be observed in Hungary: last year we have seen a trend of rethinking the areas, the reestablishment of meeting rooms and lounges, screens became more common and employees sat more distantly.’ –  he said.

Valter Kalaus also recalled another recent remarkable domestic survey. This has resulted in further strengthening of the busines service centers, which has a significant impact on the office market as 64,000 people already work in this sector in Hungary – not only in Budapest but also in big secondary cities. He believes that multinational giants will further develop these centers in the future, based on the prosperity of existing centers and the recognition of the fundamentals of the Hungarian economy and office market. He added however that the fact that the vacancy rate has increased steadily over the past 12 months should not be hidden. But it is still below compared to most of the European countries.

Valter Kalaus is admittedly a key player of the Hungarian real estate market: daytime he’s the managing director of VLK Cresa, a significant leader in the Hungarian commercial real estate advisory market, while at dawn he’s training for the next continental race as a professional swimmer. Without sport, he would not be where he stands today, thus VLK Cresa successfully represents a unique business approach on the Hungarian market.

Valter gets up at five in the morning to complete his weekly 15–20-kilometer swimming training, then heads to the VLK Cresa office. He returns home from work around 6-7 p.m. to spend the rest of the day with his family. His “self-time” comes after 10 pm, however he has to get up again at five am the next day.

The VLK Cresa MD has been swimming since the age of 5. He was a member of the Seoul Olympic swimming team of Hungary and still competes in the masters category, wining several world-, and European championship titles. Last year he became a board member of the Hungarian Swimming Association strengthening further the Hungarian swimming platform.

He began his career as a real estate advisor in the US and continued back in Hungary. VLK Cresa is the Hungarian office of the world’s largest real estate consulting firm representing tenants only, which he has been leading since 2014, becoming one of the 50 most influential domestic real estate professionals in 2020.

‘How can you keep the balance between sports and professional career? In brief, it is quite hard.’ admits Valter Kalaus, yet he is certain that without sport he would not have reached the same business success. ‘I’m deeply grateful to my parents that they took me to the swimming pool when I was little, because the professional sport is a perfect mirror of the business world. You learn to win, to lose, you encounter fraudsters and fair situations as well. But primarily, it gives you tremendous self-discipline, willpower, concentration, thus you don’t collapse under pressure.’

In the domestic real estate advisory market, VLK Cresa is the only one who represents tenants only. Other real estate agencies serve both, the landlord and the tenant side at the same time, however according to Valter, it is impossible to represent a tenant effectively, by representing the landlord as well.

‘We offer to find the best real estate solution to fulfill the business needs of the tenants, including if you face a lease renewal, through achieving more favourable lease terms,’ says the managing director. VLK Cresa represents tenants from the assessment of their needs and expectations, through the competition of properties and the negotiation with the landlord, until the handover of the property, and even beyond.

Landlords always have a competitive advantage over tenants, as tenants do not have an extended knowledge of the real estate market, unlike landlords. VLK Cresa not only puts the tenant in a winning position during the negotiations when planning to move through his expertise, but by thoroughly surveying the company’s functions it can give a more accurate picture of the company’s real business needs, that they could ever map.

According to Valter Kalaus, there is a growing demand for this type of expertise. ‘Many have already realized that the relocation of a company of 100-200 people, the rent of the new property, the cost of conversion/refurbishment is a multi-million-euro decision that requires the help of a professional advisor. Employers understand more and more that apart from financial facts marketing and HR aspects also need to be considered in the real estate decisions. The office space serves as a place of socialization as well, and the appropriate and suitable office boosts the company’s productivity, success, and competitiveness.

‘Companies cannot identify all of these aspects, as this is a separate profession. They can describe their needs, which we can explore, analyze, and translate into the language of the real estate market by a thorough due diligence. Companies often wary of screening, but in the meantime, they also need it – it is easier to highlight factual findings by an external help that would be a hard task for internal communication,’ says the managing director. Valter Kalaus is proud that 95% of Cresa’s clients are returning on the next move, and communication is always mutual with partners even during the out-of-business period.

The pursuit of security will be dominant in 2021 for commercial property tenants. One or two old interior design forms are coming back, and the majority of tenants are expected to postpone their office move and extend their contract as a temporary solution, according to a survey of the Newmark VLK Hungary consulting company.

The year started in the spirit of security for the vast majority of office tenants. On the one hand, the tenant companies want to ensure the continuity of their own operations, and on the other hand, to give enough space to the employees who come in the office to work between two days of home office. Waiting became a common approach, with more tenants postponing the move and opting for an extension, even if it is for less years than in the pre-pandemic period – Valter Kalaus, MD of Newmark VLK Hungary summed up the results of the survey.

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2020 brought great changes in the domestic real estate market. Many have been guessing what event, or how and when it will end the unbroken soaring we have been experiencing since 2014, but no one ever imagined that a world pandemic will be the cause, coming from outside the world’s economic process. The defense against Covid-19 has reshaped the real estate market in a few weeks. While some real estate market sectors are struggling for survival, others sectors exploded as an effect of the introduced safety restrictions. However, the majority are waiting, planning, rethinking their market strategy. So life has not stopped, the developments moved ahead, there were market transactions as well, but there is no doubt that we are on the verge of a transformations, that will change the real estate market on the long term. In the spirit of this, this is 5th time in row to present the most important domestic players of the real estate industry, and similar to previous years you can meet company managers, owners, investors, developers here.

Valter Kalaus
The founder and managing director of Newmark VLK Hungary has almost 25 years of comprehensive international experience in corporate real estate consulting and tenant representation. He has assisted a large number of Fortune 500 and Fortune 1000 companies in the USA and various other global real estate markets.

Since 2001 he has represented real estate users mainly in the Central European real estate market, in 2008, he joined KPMG as a Director – Real Estate to lead the newly established corporate real estate businessline, then he established VLK Real Estate Consulting the predecessor company that became VLK Cresa in 2015, and Newmark VLK Hungary in 2022.

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