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HB Reavis undertakes two new office projects

A reconstruction in Buda and a series of towers on the Váci Corridor show that the firm is feeling good about the Budapest market.

A sketch of the plans for Bem Palace. 

Apparently feeling bullish about the positive parameters in the Budapest office market, HB Reavis is pursuing a dual office development strategy, with one refurbishment and one new build. 

The firm is reconstructing the classic Bem Palace into 32,000 sqm of office space in Buda’s Second District, while at the time securing a large land plot that has permission for a large office project close to Árpád híd in the ever-popular Váci business corridor. The Slovak-based developer has already successfully leased and sold its first Budapest office project, the 21,000 sqm Váci Corner, to Zeus Capital Management.

The latest project, designed by Finta Studio, will deliver 136,500 sqm of leasable space in a series of towers up to a possible height of 90 meters located in a green environment, with an additional 10,000 sqm of service space. Construction of the first part of the phased speculative development is due to start this summer with a proposed completion date of 2018. The size of the scheme is an indication of confidence on the demand side of the Budapest office market and the continued popularity of the Váci Corridor with developers. The project provides the possibility for companies to establish offices in stand alone buildings in a green environment. With such a large-scale project, HB Reavis is able to pursue a phased development schedule based on pre-leases with flexible delivery dates.

The developer has also purchased the classic Bem Palace office building from Europa Property Fund, and plans to redevelop the listed building into a 32,000 sqm office complex. A building permit has been granted for the protected building following negotiations between the Office for Culture and Heritage and the designers of the project, T2.a Architects studio. A former military barracks built in 1897, and the site of fighting in the 1956 uprising, the renovation will include public areas and the design aims to reflect a combination of the old and new, maintaining elements of the original facades and fittings, as agreed with the heritage authorities. The project is located on the Buda bank of the Danube facing the central Fifth District, and Zoltán Radnóty, CEO of HB Reavis Hungary, anticipates that similar tenants to those located in the central business district of Pest will be attracted to a project within an urban environment and in close proximity to a metro station. The redevelopment is due to be completed by the end of 2018.

Growing confidence

“The growing confidence in the Budapest office market and in our projects is reflected in the fact that financing is now more available, with a number of banks offering to provide financing for these projects,” Radnóty said.

HB Reavis is regarded as one of the leading developers in the region and has office, logistics and retail projects in Czech Republic, Slovakia, Poland and Turkey, in addition to two office projects in London. The company entered Hungary at a time when it was generally considered to be a very difficult development market, and is aiming to become a market leader with the delivery of office projects in 2018-19.

Global real estate services firm Cushman & Wakefield is forecasting that around 150,000 sqm of office space will be delivered in Hungary in 2018, with 70-80,000 sqm expected in 2016 and 2017. “The large volume will be delivered in 2018; a lot of this is pre-let, although a significant part is speculative. But we also anticipate that take-up will continue to be high and the most important issue is that we see new companies entering the market and therefore we predict that net absorption will be around 150-180,000 sqm with the result that vacancy will slightly decrease or remain around the 10% mark up to 2018,” the company says.

In addition to multinationals, he sees a number of Hungarian occupiers coming into the market, such as start-ups that no longer want to be based in apartments or in older buildings and want to be in modern offices for the benefit of both their workforce and their image. Additionally, a number of government agencies are moving into the letting market.