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Academia Offices 80% Let Says Asset Manager ConvergenCE

Office Market

The Academia Offices, a classical renovated building by Europa Capital and ConvergenCE.

Colossyan, one of Hungary’s fastest-growing start-ups, has signed a 1,000 sqm lease at Academia Offices, located in the historic center of Pest overlooking the Danube. Six months after its official opening, Academia has exceeded 80% occupancy, reflecting the increasing demand for centrally located, future-proof office space, according to ConvergenCE, developers of the project.

The deal follows an earlier lease agreement with another emerging local start-up, Shapr3D.

“Choosing Academia Offices was no accident. We follow an office-first policy, making the quality and location of our office space crucial to provide the best environment for our employees,” said Dominik Kovács, CEO of Colossyan.

The 12,500 sqm Academia in Central Pest aims to receive Well “Gold” and “Platinum,” Breeam In-Use “Excellent,” and has already obtained WiredScore “Gold” and Access4You. The investor, Europa Capital, delivered Academia Offices as part of a redevelopment and refurbishment of a fin de siècle listed building in partnership with ConvergenCE, the asset manager.

ConvergenCE estimates that the development will be close to fully leased in addition to achieving its Well third-party accreditation by the end of the year.

Avico Group Tops Out Univery Residential Project

Avico Group has celebrated the topping out of Univery, its 112-apartment project in Józsefváros in District VIII. The energy-efficient building, located near prominent universities, was designed with the needs of young people in mind. The condominium is expected to be handed over in the first quarter of 2025, according to the developer.  

Semmelweis University, Óbuda University, Pázmány Péter Catholic University and the Ludovika University of Public Service are all within walking distance of the Univery project. The six-story building, designed by Casiopea Group, is described as aligning with a modern urban lifestyle. It has an “A+” energy efficiency rating.

“The rehabilitated areas of District VIII continue to develop at a tremendous pace, so there is still a huge demand for apartments in the area, both for owner-occupation and for investment purposes,” says Ákos Rónai, sales director of Avico Group.

“The proximity of the universities, Rákóczi tér and Orczy kert make the development particularly attractive for young people and investment buyers. Therefore, we have aimed to meet the expectations and tastes of the new generations in terms of style and layout,” he adds.

Avico Group has a portfolio of nearly 4,000 apartments and is also involved in developments in Districts XVIII, IX, XI, and XIII.

Uncertainty in the Office Market

Both tenant and landlord sides in the Budapest office market are characterized by uncertainty and a wait-and-see approach, as the key players will be subject to ESG reporting obligations from next year.

Although the guidelines are already known, the detailed regulations are still awaited, says Zsolt Kákosy, senior director of Icon Property Management. He argues that the new requirements will intensify market polarization, with those who prepare in time for the changes coming out ahead.

“COVID-19 has modified the office usage habits, causing some uncertainties for both tenants and landlords. Unemployment is low, the companies are fighting for high-performing employees, and they are aware of the fact, that not all co-workers are ready to return to the office due to the rise of remote work,” Kákosy argues.

“Those companies that have decided to move in response to these changes typically lease smaller office spaces and do not expect 100% attendance. However, many are still waiting, working on an optimal work arrangement and a corresponding workplace environment,” he says.

“Uncertainty is also present among tenants and landlords because the detailed regulations for compiling sustainability reports based on ESG requirements have not yet been established. Meanwhile, meeting the new requirements will require further investments and developments on the owner’s side,” Kákosy says.

“However, ensuring the necessary financial resources is not a simple task nowadays due to high yields and interest rates posing challenges for both the credit and equity sides, which are also affected by changes in property values and lower price expectations from buyers,” he argues.

“In this difficult market environment, it will become clear who the stronger capital and credit-worthy players are; those who will be able to make the investments required by ESG requirements (potentially in collaboration with tenants). As a result, these players will gain a competitive advantage over less capital-strong or overleveraged players,” Kákosy adds.

Office stock is approaching 4.3 million sqm, according to the Budapest Research Forum (the BRF, which comprises CBRE, Colliers, Cushman & Wakefield, Eston International, iO Partners and Robertson Hungary). Cushman & Wakefield says approximately 178,000 sqm of new space is expected to be delivered in 2024, exacerbating vacancy rates. Office vacancy has risen to 13.8.

The view from a property management perspective is that, in uncertain times, PM companies have a mediation role between tenants and landlords and coordinate between financial, legal, and market demands and technical possibilities.

Properties whose owners have already ensured a high level of service quality through ongoing maintenance and renovation, the involvement of the right experts and appropriate tenant dialogue, will appreciate in value. The introduction of ESG standards is expected to cause both a decline and an increase in vacancy rates, especially in the less capital-rich and lower segment of the office market.

Kákosy concludes that the tightening of sustainability requirements could start a wave of renovations, possibly together with tenants. The costs, considering the entire life cycle of buildings, are much lower than those associated with maintenance and operation. Sustainability and return on investment aspects must also be balanced when implementing these activities.

This article was first published in the Budapest Business Journal print issue of June 28, 2024.

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