New developments must be designed to comply with increasingly all-embracing ESG expectations and staff demands to attract tenants successfully. Only the best-designed, sustainable and well-located office developments will be successful in this more demanding office market environment, whether in Hungary or other CEE capitals.
The market across CEE is showing signs of solid growth and recovery, supported by the region’s strong economic fundamentals and rising investor confidence, according to the latest “Office Market Landscape CEE Region” report by JLL and iO Partners.
“Despite limited new supply, investment market dynamics are strengthening, and tenant demand is stabilizing, particularly in Prague, which recorded exceptionally strong annual results,” says Mateusz Polkowski, head of research at JLL Poland.
“Last year in Warsaw can also be considered successful. The tightening availability of high-quality office space, coupled with corporate efforts to encourage employees’ return to offices, is exerting upward pressure on prime rents. These market fundamentals indicate continued resilience despite global uncertainties,” he adds.
The CEE office market is experiencing notable shifts. In 2024, the office stock in the region’s six capitals (Belgrade, Bratislava, Bucharest, Budapest, Prague and Warsaw) increased by only 325,000 sqm, and the number of new investments remains limited. Net demand for office space in the capitals amounted to 1.4 million sqm last year, of which 850,000 sqm is already under construction.
“The CEE office market continues to demonstrate remarkable resilience, with stabilizing demand, growing investor interest, and a clear trend toward rising prime rents amid limited new supply. As occupiers increasingly seek top-tier, ESG-compliant space, as vacancy decreases across the region, we expect further upward pressure on rents and a growing imbalance between demand and availability, particularly in key capital cities,” comments iO Partners.
Development activity remains limited across the region, translating into a further decrease in new completions. It is estimated that in 2025-2026, the annual new supply in the six capitals will be approximately 250,000 to 300,000 sqm, an important factor shaping the future availability of office space, according to iO Partners.
A second significant trend is the gradual recovery of tenant activity. Although the transaction conclusion process still takes longer than previously, there is evidence that tenants are taking more decisive steps to secure suitable spaces. This is partly driven by strengthening return-to-office trends, as more companies announce revised requirements for employee presence in the workplace.
With its CBD dominated by skyscrapers, Warsaw has the largest CEE office market, followed by Budapest.
“The Warsaw market continues to show a moderate but stable development pipeline, with more than 130,000 sqm of office space expected to be completed by the end of 2025. Limited office developments have been announced beyond 2027. A growing trend of refurbishing and repurposing older buildings has been noticed,” says Avison Young Poland.
Another skyscraper has arrived in Warsaw as Skanska has topped out the 27,000 sqm Studio A. At the same time, the regional developer has sold the 17,600 sqm Studio B in the Wola district of the city to Sweden’s Stena Real Estate for EUR 86 million, the third transaction between the parties in CEE.
Modern office spaces (no more than seven years old) enjoy higher occupancy and rental rates than older buildings. For example, in Warsaw, vacancy rates are 5% for newer buildings versus 15% for older stock. Tenants prioritize operational cost savings, sustainability, and modern amenities, according to Colliers.
“We are seeing a growing loss of competitiveness among older office buildings. More and more owners are stepping back from actively marketing space that no longer meets today’s tenant expectations, whether due to outdated technical specifications or a lack of environmental standards,” comments Emilia Trofimiuk, research manager at AXI Immo.
“Some of these assets are awaiting renovations, while others are being repurposed, most commonly for residential use. The market is becoming more intentional, and available space is now better aligned with what businesses truly need. This reflects a natural maturing of the Warsaw office sector,” Trofimiuk adds.
The Czech office market is currently experiencing very low construction activity. In some parts of Prague, there is a noticeable lack of modern, certified buildings that would fit the ESG strategies of most companies.
“These businesses are, therefore, facing increasing difficulties in finding alternatives to their existing space, and renegotiation is the only option for them. Low vacancy rates and a shortage of space may put pressure on rental prices in the coming period, resulting in a market where the landlord will be in a stronger position than the tenant,” says Jana Vlková, director of office agency and workplace advisory at Colliers in the Czech Republic. Investments in building quality, amenities and compliance with ESG standards remain essential to stay competitive and attractive to current and new tenants.
“We can expect the high level of renegotiations on the Czech office market to persist in the near future,” Vlková adds.
Warsaw and Bucharest have the highest green certification rates, enhancing their competitiveness and attracting investment. Markets with a high share of older stock, such as Bratislava, Budapest, and Prague, face challenges in achieving energy efficiency. Significant retrofitting investments are required to meet modern sustainability standards, says Colliers.
Gordiusz Private Equity Fund, managed by Hungary’s Gránit Asset Management (formerly Diófa), has purchased the first 21,000 sqm phase of the Equilibrium office complex in Bucharest from Skanska.
“The property’s prime location, diverse tenant mix, and outstanding ESG credentials make it an ideal fit for our investment strategy,” commented Álmos Mikesy, CEO and board chairman of Gránit Asset Management.
“The Equilibrium I transaction underscores the attractiveness of Bucharest’s office market and investors’ preference for modern, energy-efficient, and well-positioned assets, making it a strategic asset for any long-term investment portfolio,” said Robert Miklo, head of capital markets at Colliers, who advised Skanska on the transaction.
The region provides a notable office asset yield spread, with the lowest yields at around 5.5% in Prague, 5.75% in Warsaw, 6.25-6.5% in Prague and 7.5% for Bucharest.
“Due to current trends, namely the tendency of tenants to seek better quality space (the so-called ‘flight to quality’) and limited new supply, the availability of high-class office space will become increasingly scarce,” conclude JLL and iO Partners.
This article was first published in the Budapest Business Journal print issue of May 16, 2025.
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