This limited speculative office pipeline is predicted to result in a restricted supply of quality, well-located, contiguous offices that conform to sustainability expectations and regulations and satisfy tenant demands, despite rising overall vacancy rates.

New developments will need to be designed and maintained in compliance with increasingly comprehensive ESG regulatory requirements, as well as tenant and staff demands to attract tenants successfully.

“The office market is currently tenant-driven. Vacancy is expected to rise further as state institutions are leaving rented premises and moving into their own developments,” comments Attila Madler, country chief asset management officer at CPI Hungary.

“As a result, there is currently limited room for speculative developments, and new projects typically only start with a high level of prelease of around 80%. Redevelopment opportunities are gaining in importance, with office buildings often being converted into residential or hotel use, provided the location is suitable,” he notes.

Budapest office stock has remained flat, with 88% of the space currently under construction being built-to-suit. CBRE has traced 530,000 sqm of office space under construction; however, these figures are distorted by the number of public sector bodies that have preleases at BudaPart and Dürer Park, by Property Market, and Zugló City Center by Bayer Property.

CBRE estimates a current pipeline of 165,000 sqm for 2025, 270,000 sqm for 2026 and 92,000 sqm for 2027; in all cases, there is a significant prelease ratio of more than 60%.

Total Budapest office stock stands at around 4.42 million sqm according to the Budapest Research Forum (BRF, which comprises CBRE, Colliers, Cushman & Wakefield, Eston International, iO Partners, and Robertson Hungary). Around 3.6 million sqm of this was developed on a speculative basis. Budapest remains the second-largest CEE office market after Warsaw.

Vacancy Rising

CBRE sees vacancy rising to 15% by the year-end and further pressure on overall vacancy rates, as public sector authorities vacate around 225,000 sqm of older stock.

Exceptions to the rule regarding speculative Budapest office development include Skanska, which is constructing the 22,000 sqm second phase of the 72,000 sqm H2Offices complex in the Váci Office Corridor, scheduled for completion in the first quarter of 2027. Skanska has secured a prelease for the whole complex to a single tenant.

“As part of its market-making approach, H2Offices is the first project in Hungary where Skanska has required Environmental Product Declarations (EPDs) from suppliers for major construction materials,” says Aurelia Luca, executive vice president of operations for Hungary and Romania at Skanska’s commercial development business unit.

“While major works are in progress, the project has also achieved a record lease agreement, the largest speculative lease of the decade on Hungary’s office market,” she adds. The complex is planned to be certified LEED “Platinum,” WELL “Platinum,” and Acess4you “Gold.” WiredScore and Smart Score Certifications have also been applied for.

Another major speculative development, the 35,000 sqm Centerpoint III by GTC on Váci út, will bring total space at the complex to 78,000 sqm of LEED and WELL “Gold” certified space.

Also on Váci út, another established Budapest office developer, Codic, is redeveloping the Art Deco Modiano building, located on a prime site, into a 13,500 sqm office complex. Codic is aiming for BREEAM “Excellent” and Energy “AA++” accreditations.  

Any new speculative development must align with ESG requirements and meet the market’s demands for quality; existing older stock will require upgrades and redevelopment to reach these standards. In general, successful developments will be more ESG-compliant, better designed from an exterior and interior perspective, and more conducive to a favorable work environment.

Stakeholders typically need to consider three major issues: location, price and ESG issues, and also how a project impacts the broader population. With regard to location, a successful office must provide public transport connections, car access and electric battery charging facilities.

Sustainability Essential

Sustainability accreditation has become an essential factor: most of the deals that Newmark VLK works on involve an office building that is sustainability accredited, says Valter Kalaus, managing partner of Newmark VLK Hungary.

When it comes to existing stock, landlords face the choice of repositioning or repurposing, as owners need to look at the feasibility of an office building in a good location, he adds.

The Academia Office Building, refurbished by Europa and ConvergenCE, has reached nearly 100% occupancy. The building overlooking the Danube combines heritage character with modern infrastructure, and has been awarded the BREEAM “Excellent” certification. Moreover, the older traditional wing of the complex has recently obtained the WELL “Gold” certification.

“Academia is a true trophy asset. Its value is supported by a rare combination of excellent leaseability, premium location, and a forward-looking, sustainable operating model,” says Csaba Zeley, managing director at ConvergenCE.

There is potential for further rental growth in 2025, particularly for schemes with strong ESG credentials in South and Central Buda and the Váci Corridor, in the view of Cushman & Wakefield.

Skanska’s Luca believes that selective new developments will do well in prime, well-connected areas where transit options are strong.

“There’s definitely a clear ‘flight to quality’ happening; businesses want efficient workplaces that deliver transparent ESG performance. At the same time, redevelopment and deep retrofits are gaining traction as owners look to improve energy performance and user experience to keep their assets valuable for the long haul,” she says.

Gábor Kutas, founder and CEO of Recorde Asset Management, argues: “There will not be an upturn in office development before 2028-29. State-sponsored developments will result in more second-hand vacancies, and it will take some time for the market to absorb the surplus. However, this also creates a window of opportunity for those developers who can ride the wave with well-positioned projects,” he concludes.

This article was first published in the Budapest Business Journal print issue of October 17, 2025.