the budapest office market - eltinga...office space (the vacancy rate) is most likely smaller than...

eltinga.hu [email protected]

ELTINGA Centre for Real Estate Research

Working Paper 2012/1.

The Budapest Office Market

eltinga.hu [email protected]

ELTINGA Centre for Real Estate Research

ELTINGA PUBLICATION, 2012.

Authors:

Norbert Czinkán Stefánia Dankó Miklós Farkas László Göndör

Miklós Horn Áron Horváth Aliz McLean

Gábor Révész Gábor Soóki-Tóth (CBS Property)

Always indicate the source when citing from the study.

We thank Gábor Borbély (CBRE), Krisztián Karácsony (Ecorys), Anna Maksay DTZ) and Gergely Répássy (EBuild) for the help provided.

TABLE OF CONTENTS

Contents

CHARACTERISTICS OF THE BUDAPEST OFFICE MARKET 1

Data used in the analysis 1

Location of offices in Budapest 2

Mapping market characteristics by distance from the city centre 5

OFFICE SUBMARKETS IN BUDAPEST 8

CBD, 5th district 10

The Váci Road corridor 11

Central Ferencváros: Millennium City Centre 11

South Buda 12

North Buda: the area around Mammut and MOM park 13

THE OFFICE MARKET FROM A MACRO PERSPECTIVE 16

NEAR AND LONG-TERM FUTURE PROSPECTS 19

BUDAPEST IRODAPIACA – ELTINGA HELYZETKÉP

1

This study provides an overview of various aspects of the Budapest market for office space. The first

chapter presents the market’s characteristics with regard to price and volume, taking into account the

capital's spatial structure. Building on the first chapter, the second presents the main submarkets of the

Budapest rental office market. The third chapter discusses the past ten years from a macro perspective.

The analysis concludes with a discussion of future prospects in this market.

CHARACTERISTICS OF THE

BUDAPEST OFFICE MARKET

Data used in the analysis

This first chapter of the study will present the spatial

characteristics of the Budapest real estate market

relying on a dataset compiled by the authors from

publicly available data. The data were collected during

2011, our main source being online advertising. The

database used in the analysis may therefore differ in

accuracy and completeness from the data registered by the experts of the most important real estate

agencies (see the box for information about the Budapest Research Forum), but (as shown in Table 1)

the datasets are similar in magnitude: the size of the Budapest office rental market is approximately 3

million square metres in both sources. In addition, a stock of about four or five hundred thousand square

meters of privately owned office space exists, according to studies.

AUTHORS’ DATASET1

BUDAPEST RESEARCH

FORUM

No. of office buildings in Budapest 339

Total size of offices in Budapest (m2) 2 779 543 2 560 100

Table 1. The size of the Budapest office market

Table 2 shows the key features of our dataset. The majority of the area for rent can be found in category

A offices, while 10% belongs to the A+ category. The remaining approximately 20% is shared between

category B offices. Advertised and contractual rental fees are given in Euros. The proportion of empty

office space (the vacancy rate) is most likely smaller than the 39% shown in Table 2 for the proportion of

1 We compiled our own dataset for this paper, using the websires irodahaz.info and iroda-budapest.hu, and the website of the

members of the BRF, during 2011.

The Budapest Research Forum

The most significant international real estate

advisors are represented and active in Hungary:

CB Richard Ellis, Colliers International, Cushman &

Wakefield, DTZ, GVA Robertson, Jones Lang

LaSalle and King Sturge (the parent companies of

the latter two have just recently announced

merging their European divisions) are all present

in the Budapest real estate market. Together with

Eston International, a firm with a Hungarian

background, they are the eight members of the

Budapest Research Forum (BRF).


2

spaces available for rent. This is due to the fact that advertisements posted include spaces still in use

(but with contracts terminating), and office buildings that are not yet built.

CHARACTERISTICS OF OFFICES IN

AUTHORS’ DATASET

Proportion of category A spaces 77 %

Average advertised rent 10,91 €/month/m2

Average operating cost 3,57 €/month/m2

Median year of construction 2000

Proportion of spaces for rent 39 %

Table 2. Features of the author” original database on the Budapest office market

Location of offices in Budapest

This section will present the spatial characteristics of the Budapest office market. Figure 1 shows the

location of rental office buildings larger than ten thousand square metres. It is immediately apparent that

the office markets of Buda and of Pest show differing characteristics: there is a greater number of office

buildings in Pest and they are also more densely located. This can be explained by the different

topographical, historical and institutional conditions. The hilly landscape of Buda is a highly prestigious

residential area and transportation is also more difficult (currently there are three tube stations in Buda

and forty in Pest). The historic part of Buda, which contains the Castle is of course architecturally

protected, and the resultant regulatory constraints preclude the building of large office buildings in this

area. Groups of offices can already be identified on Figure 1: dots close to each other represent large

and important offices.

Figure 1. Location of office buildings larger than 10 000 m

2

Figure 2. Distribution of office space in Budapest (darker tones indicate higher values)


3

Figure 2, above on the right, shows (by postcode) where the density of rental office space is greater or

smaller. Although the distribution resembles that of Figure 1, in this case all offices were taken into

account (not only those over ten thousand square metres), which alters the picture slightly.

The distribution of office space is also shown in Figure 3, in this case, in three dimensions. The higher

areas represent greater density, and therefore the city centre stands out: the central business district

(CBD) becomes visible. The dominance of the Pest side and the smaller role of outer districts are also

clear.

Figure 3. Density of office spaces in Budapest (Darker tones indicate higher values. The prominence of the territorial units is proportional to the value of real estate density.)

The CBD is also the administrative centre of the city. The country is run from Ministry buildings and the

Parliament, both located on the Pest side. The most important locations are shown in Figure 4.

Figure 4. The Parliament and the Ministry buildings

It is clearly visible in Figure 5 that major financial institutions’ and consultants’ headquarters, the offices

of prominent companies in the service sector, and dominant companies of the FIRE-sector (finance,

investment and real estate) are also located in the city centre. Of course, these companies typically own


4

their office buildings, or at the least are located in buildings that are not on the open market for rented

office space.

Figure 5. Buildings of the FIRE sector (based on EBuild data and authors’ dataset)

It is also apparent from Figure 5 that some of the high-prestige firms choose headquarters that are

further away from the city centre. This phenomenon can also be explained by the fact that compared to

the historical city centre with its limited possibilities for constructions, larger and more modern buildings

could be built, for example, along Váci Road.

This is confirmed by Figure 6, which shows the proportion of category A office buildings in each area. It

is clear that further away from the city centre – where there are milder regulations on construction –

newer and larger building occur in greater numbers.

Figure 6. Proportion of category A office spaces in Budapest

(Darker tones indicate higher values.)


5

Mapping market characteristics by distance from the city centre

This section examines how the nature of the Budapest office market changes depending on the distance

from the city centre. We measure distance as the crow flies, in kilometres. More specifically: we define

the Chain Bridge as the city centre. On the Buda side, this is where the zero-kilometre stone is in fact

situated, and on the Pest side this means Széchenyi Square. Figure 7 shows the total area of rental

office space found in the authors’ database, as we moving away from the city centre.

Figure 7. The total area of office buildings in the database by distance from the centre

It is worth noting that the areas of the rings defined by each kilometre increase with distance. This is

relevant in interpreting the difference between Figure 8, which shows office density as opposed to Figure

7, which shows office areas. Figure 8 shows an expected pattern: the density of office space increases

with proximity to the centre. Due to topographical conditions the pattern on the Buda side is more

uneven than that of the Pest side. On the Pest side, only the large offices on Váci Road stand out,

located between five and six kilometres from the centre.

Figure 8. The density of office buildings


6

Another typical hypothesis is that office prices decrease further away from the centre. Figure 9

demonstrates that this holds in Budapest’s case as well. Again, the relationship is less visible on the

Buda side, as transport and accessibility conditions are not linked as closely to distance as the crow flies

as on the Pest side.

Figure 9. Typical rents of office buildings by distance from the centre

This relationship can also be presented in statistical form. Figure 10 plots actual and estimated rents.

The figure shows that the estimated decrease in value when moving away from the centre is slighter in

Buda than in Pest. Specifically, in Pest one kilometre closer to the centre, rents increase by 8% on

average, while this proximity premium is only 6% in Buda.

Figure 10. Observed and estimated rents by distance from the city centre

The final figure in this section presents an illustration of the size of office buildings. Figure 11 shows the

average area of office buildings by distance from the city centre. Compared with the figures showing

density and rents, in this case the pattern is less apparent at first glance. Once again, the effects of the


7

topographical features and the restrictions on construction in the historical city centre can be observed:

large-area (tall) office buildings could only be built further from the city centre.

Figure 11. The average area of office buildings by distance from the city centre

Although it takes more time to get into the CBD from offices built further from the city centre, but

efficiently utilized large offices that are close to each other can offset this effect, as proximity to sector

partners can have favourable effects. Unsurprisingly, this has led to clusters of offices forming in various

parts of Budapest, in addition to the CBD. These clusters will be investigated in detail in the next part of

the study.


8

OFFICE SUBMARKETS IN BUDAPEST

The classic literature on the topic has consistently stressed the importance of distance from the city

centre in the location patterns of the office market. More recent observations reveal another important

factor in deciding the location of offices: proximity to each other. This can explain what pulls together

companies working in certain office types. Office buildings close to each other can be viewed as forming

office clusters. In Budapest, professionals mention Váci Road, South Buda (the area containing the so-

called “Infopark”), North Buda (the area around the malls MOM Park and Mammut), and most recently

the Millennium city centre situated in Central Ferencváros, and of course the CBD as such clusters. In

the analysis we present these areas in more detail.

Figure 12. Clusters in the Budapest office market

The significance of these submarkets is supported by the fact that nearly half of the area in our database

is located in there. Figure 13 shows that, from among these areas, the Váci Road corridor and the 11th

district contain the most office space.


9

Figure 13. A breakdown of submarkets in Budapest based on office size

Figure 14 below shows rents in the submarkets.

Figure 14. Rents in the Budapest office submarkets

The CBD not only has the highest prices on average, but also the highest rent overall. The privileged

status of Váci Road could come as a surprise to those less familiar with conditions in Budapest, but not

to those who know the buildings and tenants well. Below, we present each submarket separately,

making sure to reflect on location-specific information.


10

CBD, 5th district

CHARACTERISTICS OF THE CBD OFFICE MARKET

Number of office buildings 33

Total size of offices (m2) 164 307

Proportion of category A spaces 85,88 %

Average (median) area of office building (m2) 4979 (3262)

Average (median) advertised rent (€/month/m2) 12,77 (12,00)

Average operating cost (€/month/m2) 3,87


Proportion of office space for rent (based on

advertisements)

48 %

Table 3. Characteristics of the CBD office market

This area has traditionally been the city's administrative centre and currently several ministries and

offices still operate here. In addition, several banks (OTP, UniCredit, CIB and not long ago K&H) and

large companies own significant real estate here, either as rentals or as private property. The “Bank

Center” is also located here, which is one of the country's first, premium category rental office buildings,

considered emblematic. There are almost 160 thousand square metres of office space in the 5th district,

and a large proportion of them (20%) are category A+. There is also a significant proportion of category

B office space (10%). The prevalence of category A+ buildings illustrates the unique location of the

submarket, resulting in high value. The high proportion of category B buildings implies that large

additional prime office space could be obtained through the renovation these buildings. This is especially

relevant as there are few good-sized areas left in the district where construction could take place, so new

developments primarily utilize older building of lower categories. The average price per square metre is

around 13 euros at present, and the highest prices in the city can also be found here (20-23

€/month/m2).


11

The Váci Road corridor

CHARACTERISTICS OF THE VÁCI ROAD CORRIDOR


Total size of offices (m2) 491 862


Average (median) area of office building (m2) 13 663 (10871)





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31 %

Table 4. Characteristics of the Váci Road corridor

The capital’s “office zone” has gradually moved outwards from the Nyugati railway station to Újpest-

Városkapu, along the busy No. 2 high road and the tracks of the blue metro line. The Váci Road corridor

is the largest submarket, covering 16% of the capital's total office stock. The popular location and the

outstanding quality of the offices are reflected in the prices: one square metre of office space is the

second most expensive in the city, following the CBD. The Hungarian headquarters of Ernst & Young

and KPMG, and from among the banks, the headquarters of Budapest Bank, MKB and Commerzbank

are all located here.

Central Ferencváros: Millennium City Centre

CHARACTERISTICS OF MIDDLE-FERENCVÁROS OFFICES


Total size of offices (m2) 243140


Average (median) area of office building (m2) 12157 (6406,5)

Average (median) advertised rent (€/month/m2) 11 (11,5)


Median year of construction 2006, 2007


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37 %

Table 5. Characteristics of Middle-Ferencváros offices


12

This relatively young submarket makes up only a fraction of total office space in Budapest, however, the

proportion of category A and A+ buildings is the highest here. Construction of office buildings in Central

Ferencváros began in the second half of the last decade, and further large investments were made in

2011. Its largest block is called the “Millennium City Centre”, built by Tri-Gránit starting in 2000. The

area’s prestige also depends on the nearby Palace of Arts and the National Theatre, and some buildings

also have a panoramic view over the Danube. The Hungarian headquarters of Morgan Stanley, Nestlé

and Vodafone are located in this area, and the K&H bank is moving here as well. Prices are around

12€/month/m2 in this submarket, but lower prices can also be found in the more modest buildings of this

neighbourhood.

South Buda

CHARACTERISTICS OF THE SOUTH-BUDA OFFICE CLUSTER







Median year of construction 2000, 2001


advertisements)

27 %

Table 6. Characteristics of the South-Buda office cluster

This area became a submarket due to the construction of the “Infopark”, carried out in the early 2000s.

Although public transport accessibility is not as good as for the CBD or for Váci Road, this is still a

sought-after area, especially by businesses operating in the IT and other technological sectors. This is

partly due to the proximity of larger universities (BME, ELTE). HP and the T-group also rent significant

spaces here.


13

North Buda: the area around Mammut and MOM park

CHARACTERISTICS OF THE NORTH-BUDA OFFICE CLUSTER









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40 %

Table 7. Characteristics of the North-Buda office cluster

North Buda is quite a heterogeneous region from an office market perspective. Due to the topographical

and historical characteristics of the Buda side, office concentration similar to the CBD in size cannot

develop; however, larger groups of offices can be found around the Mammut and MOM Park malls.

Although this submarket, with its approximately 100 thousand square metres, accounts for only a small

part of the Budapest office stock (approximately 5%), there are several privately owned offices in this

area, the largest being the headquarters of Magyar Telekom. It is also worth mentioning the Graphisoft

Park, slightly further away, which offers high-quality services mainly for technological companies (e.g.

Microsoft, SAP and Canon). This is a specialized group of tenants, and the Graphisoft Park is often left

out of analyses of the office market, but it is worth knowing that its combined size is almost as large as

the Buda side submarket around Alkotás Road and Krisztina Boulevard.


14

More on the statistics

The estimation conducted for Figure 9 explains the logarithm of rents with the distance from the city centre. We allowed the slopes to be different on the Buda and Pest side, i.e. an interaction with the side-dummy was also included. The regression –and the figure – show a strong connection between the measured distance from the city centre and rental fees, which is slightly smaller on the Buda side.

We also ran a more detailed regression, explaining rents with other observable characteristics. We estimated 14 differently specified models from our dataset, which includes 339 Budapest offices and their features. Out of these, we present the specification we think is the most expressive. The results are as follows:

ln(rent) = – 0,0349·Chain Bridge (km) + 0,233· category

A – 0,0673·vacancy rate

+ 0,0124·built after 2000

(0,00796) (0,0457) (0,0593) (0,00561)

+ 0,0331·CBD + 0,0878·Váci Road

+ 0,111·Mammut + 0,157·MOM

(0,0668) (0,0589) (0,0930) (0,104)

+ 0,0182·MIddle-Ferencváros

– 0,0270·11th district

– 22,5

(0,0742) (0,0560) (11,23)

Results in bold signify strong, while normal letters weaker significance, the grey tone show the connections that are statistically not significant. We indicated the estimated standard errors in parentheses below the coefficients.

The dependent variable is the logarithm of monthly rents, so the effect of a one unit change in an independent variable

can be expressed in percentage form. Out of the explanatory variables, the distance from the city centre showed

significant results even after controlling for other features of the buildings. All other factors being equal, the 23%

premium of the A category buildings can also be shown statistically. Although we tried out different specifications of the

ages and rents of the buildings, and as expected, the rents of newer offices are higher, the category classification

determines the connections more strongly. This means that only a few percentage points difference is expected in the

prices of two category A buildings with only a few years’ difference in age.

The premiums of various submarkets are difficult to detect statistically, because even though their signs and scales are

plausible, due to the small sample size the results are not significant. In the case of the CBD the most valuable factor is

the proximity to the centre, which is already embodied in the distance coefficient. However, in the case of Váci Road an

approximately 10% premium appears clearly, while it is not directly in the city centre part as measured in kilometres. It

is evident that in Buda even higher premium values of about 15% can be seen in the popular submarkets: the historical

and topographical conditions of Buda do not allow the construction of tall and modern buildings close to the CBD,

therefore other locations increase in price even if they are further away from the centre. No substantial premiums could

be found for the Millennium City Centre and 11th district (Infopark). Naturally, there is significant uncertainty in the

results in this case as well.

Finally, it is worth mentioning that the relationship between the rents and the vacancy rate can be interpreted as well.

Holding all else constant, an emptier office building implies lower rents. This may be explained by economic causality,

namely that greater local supply has a downward pressure on rents. Naturally, it is also possible that other features –

not observable in our database – have an effect on both variables: for example both rents and the proportion of rented

offices could be lower because the neighbourhood of the office building is very noisy.


15

We conclude the discussion of the submarket with Figure 15,

which shows the accumulated amount of rental office stock found

in our dataset by year of construction.

Figure 15. Accumulated rental office stock on the office-submarkets of Budapest

The figure shows that, alongside the saturation of the CBD, new

submarkets have appeared offering a more competitive alternative

to the slow-selling real estate of the 5th district – not only in terms

of quality of services. In many cases their prestige has also begun

to compete with the centrally located properties. Developers

discovered the Váci Road corridor, and shortly afterwards, the

development of Infopark began on a large scale. The success of

Central Ferencváros started not long before the financial crisis. In

the next chapter, we will discuss developments over time in the

rental office market as a whole.

Categorizing buildings

The categorization of office buildings is not regulated internationally. Despite this – and probably also due to the cooperation of consultants – the categorization in Budapest is done by the major consulting firms in a uniform manner. The conditions for entering the A category are compliance with certain (exclusive) requirements and meeting a specified number from the list of other requirements. The exclusive requirements (hard criteria) are: excellent quality of construction, modern power supply, raised floor, up-to-date air conditioning, a sufficient number of secure parking spaces, 24-hour accessibility and professional operation. Out of the other requirements (soft criteria) a certain number must also be met: fast, modern elevators, adequate internal height, the availability of services nearby, excellent quality shaded windows, high-quality reception area, restaurant etc. Fewer constraints apply for the B category: in this class it is acceptable if one of the hard criteria (or more of the soft criteria) is not met. In the capital, the majority of office spaces belong to the first two categories, but older, unmodernized buildings of the C category are also present. Certain newly built edifices in good locations even exceed the requirements of the A category, achieving an A+ classification.


16

THE OFFICE MARKET FROM A MACRO PERSPECTIVE

In this chapter we examine developments in the office market over time, and their relationship with

macroeconomic variables. Before the change of system in 1989, the FIRE sector was under a state

monopoly in Hungary. There was no need for modern office spaces and consequently less well-

equipped, category B office buildings were built. These buildings, though to a decreasing extent, have

been utilized in the past two decades as well.

Figure 16. Accumulated rental office stock on the Budapest office market by categories

Reliable data on the office market is available from 2000, making the trends of the last decade clear.

Until 2006 the Hungarian office market was determined by the demand side. Up to 2006-2007, parallel to

economic growth (see Figures 17 a and b) the demand for rental offices rose steadily.

Figure 17a. Real GDP growth rate (%, KSH, the Hungarian Statistical Office)

Figure 17b. Employment (KSH)

Other indicators, more closely related to the office market also suggest a boom in the sector. A

significant amount of foreign direct investment (FDI) was received by the telecommunication and


17

financial sectors in the middle of the decade (Figure 18), and the graduate wage premium for workers

increased too (Figure 19).

Figure 18. The flow of FDI into sectors most present on the office market (National Bank of Hungary, NBH)

Figure 19. Graduate wage premium (KSH)

Vacancy rates and rental fees also indicate the increase in demand over the period. Rents for category

A offices have rose by 25% (Figure 20), while the registered vacancy rate decreased (Figure 22). These

trends, together with the increase in price (the declining yields are shown in Figure 21) catalysed

developments.

Figure 20. Category A rents (ECORYS, BRF)

Figure 21. Expected yields on the office market (ECORYS, BRF)

Nevertheless, as seen in Figure 22, the new supply only followed the increasing demand with a great

delay (a common phenomenon in the office market).


18

Figure 22. Main office market indicators (BRF, CBRE)

After 2006, office developments began to grow at an explosive rate, thanks to the contribution of the

financial sector: Figure 23 shows that between 2007 and 2009 the volume of mortgage loans increased

greatly, and the amount of loans related to commercial real estates increased by 40-50% in the years

before the crisis. Based on the trend of the vacancy rates we can say that the supply generated during

this period was mostly speculative (that is, developments were often started before contracted tenants

were secured).

Figure 23. Commercial mortgage loans (NBH, Report on Financial Stability, 2011. / I.)

At the end of the decade, the office market was dominated by the crisis. As expected, demand declined,

rents fell and the market experienced an increase in vacancies. The slowly adapting nature of supply

was also apparent in the crisis: even in 2009 the size of newly completed office space grew in Budapest.

The risks of investing in Hungary increased greatly during the crisis, a factor which also influenced the

expected yields of off ices.


19

NEAR AND LONG-TERM FUTURE PROSPECTS

At the end of our study we turn to the future of the Budapest rental office market. The previous chapter

showed that in the short term, the economy’s state and expected yields can determine construction

activity. As recovery from the crisis is slow and the profitability of the financial sector is battered from

many sides, any upward turn in the near future will be slow. BRF data show that there was an entire

quarter in 2011 when no new office spaces were sold in Budapest. The market has reached rock bottom,

therefore some easing up can reasonably be expected.

More controversial is the issue of the long-term future of the Budapest office market. It is customary to

speak of the potential size of the capital's office market in the following terms:

the increase in the size of the modern office market in Budapest (m2) =

the increase in the number of office workers in Budapest ·

the increase in the size of office space per employee ·

the increase in the ratio of tenants in modern office buildings in Budapest.

In order to gain a better understanding of the long-term future of the office market, all of these factors

should be considered.

The number of office workers in Budapest is already high relative to the size of the country. The GDP per

capita adjusted for purchasing power parity in the capital is more than double the national average. 44%

of full-time white-collar workers, 56% of the workforce of companies with a foreign background and 78%

of the employees in the FIRE-sector work in Budapest. We therefore do not expect Budapest’s

dominance within the country to rise further. The government-imposed, mainly ad-hoc measures on the

financial and service sectors (reduced final repayment, banking and telecom special taxes) do not

encourage new strategic investors, even though this would be needed to ensure the steady growth of

this sector. Prospects are more promising in the IT sector. The cooperation of universities, IT

professionals’ skills and governmental support underline the potential of this sector. Opinions are divided

about whether there will be an increase in working from home in these sectors.

To foresee the potential growth of office space per employee we can rely on international comparative

data. However, one must proceed with caution. Despite the fact that the area of offices and office space

per capita are key indicators of the sector, their calculation is not standardized. When measuring the

area of offices the parts taken into account differ in different countries. Partition walls are not counted

into the rentable net floor space, but the role of elevators, stairways, sanitary blocks and reception areas

are not so clear. Péter Kocsis2 has attempted to find the basis for market growth in Budapest, and it is

2 Kocsis Péter: Mekkora lehet a budapesti irodapiac maximális mérete? ReSource Magazin, December 15, 2010.


20

worth mentioning that his calculations are based on the value of 10 m2 per employee, while similar

international data rarely us values smaller than 13 m2 per employee.3 Differences may not only arise

from differences in measurement. Firstly, space requirements differ between office activities. For

instance, office space per capita is often larger in the headquarters of banks than of insurers.

Furthermore, the space requirements of various fields of activities within an enterprise are different. The

call centre typically occupies less space than client or meeting rooms, and the manager occupies a

larger space than an administrative member of staff. Another aspect is that the in-house arrangements of

older buildings are typically less economical, with more spaces that are harder to utilize than in newer

buildings. The older construction and the scattered location of several buildings may partly explain the

observation that the public sector sustains a larger space per

employee than the private sector. In order for this value to

increase noticeably a further rise is needed in the level of

services that have moved to Budapest, further activities

should be attracted to the capital apart from claims

management and call centres.

People who see the future of the Budapest office market as

promising base their optimism on the fact that there is an

increase in the number of players appearing on the modern

office market. Although the capital’s suburbs were able to

attract some large companies (such as Telenor to

Törökbálint) in the years before the crisis, we do not expect

significant relocation from the capital in the future. There are

two further sources of potential in the white-collar sector.

Firstly, if ministries and the major players of the public sector decided to move to rental office buildings,

with more efficient space utilization, that would mean new demand of the magnitude of a hundred

thousand square meters. Secondly, a significant proportion of micro, small and even medium-sized

enterprises prefer to rent apartments as workplaces. However, if the role of medium-sized enterprises is

indeed growing in Hungary, then rental offices represent an increasingly competitive alternative to

apartments. The demand coming from this source could also help stimulate the rental office market.

3 See for example: Jackoo Hackfoort – Robert Lie: Office Space per Worker: Evidence from Four European Markets. The

Journal of Real Estate Research. Vol 11., No 2., 1996. pp. 183-196.

Green offices

All over the developed world people are paying more attention to environmentally conscious construction and operation. This approach is also gaining ground in Hungary, the main promoter being the Hungary Green Building Council – hugbc.org. In conferences and workshops sustainability aspects emerge more frequently and new developments often refer to the BREEAM or the LEED system. In Hungary, in addition to the best known international systems, the German DGNB accreditation system and the EU GreenBuilding guidelines also play a role. Environmentally and energy conscious construction will probably determine the future of the Budapest office market.

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