Redevelopment of Krausz Palota Gets Underway

Office Market

The Krausz Palota on Andrássy út in central Budapest.

Having been granted a heritage permit, the refurbishment of the classic Krausz Palota by Avison Young has begun with the aim of redeveloping the 130-year-old building into a boutique office building.

Krausz Palota (or Andrássy út 12) is a World Heritage site built in 1885 based on the plans of the architect Zsigmond Quittner. The complex was initially renovated in 2002, meeting the art historical standards of the day.

This much more in-depth refurbishment, designed by BORD Építész Stúdió, will provide 4,600 sqm of class “A” office space over five floors, according to the development plans.

“Managed by AEW on behalf of institutional investors and locally managed by Avison Young, the building will be refurbished to become one of the most modern and exclusive offices concepts in the city center, focused on fulfilling the high expectations of tenants for aesthetics and comfort, while also preserving the illustrious building for future generations,” says Avison Young.

“The renovation will be completed in line with best practice sustainability consideration vying for an ‘Excellent’ ranking under the BREEAM International None-Domestic Refurbishment sustainability rating,” adds the Toronto-headquartered global commercial real estate services firm.

EBH Invest, the general contractor, has now started demolition work and is scheduled to complete the project by the fourth quarter of 2022.

As part of a UNESCO World Heritage site, the area is historically protected, severely limiting the potential for commercial development and establishing a clearly defined central business district. Genuine class “A” offices are extremely limited, and only a handful of assets are of sufficient scale or have suitable floorplates to cater for large-scale or headquarter buildings.

Being Reborn

“We are delighted that a building like this, which defines Andrássy út and its turn-of-the-century architecture, is being reborn as a modern bureau palace and is taking its rightful place in the most attractive district of Budapest,” comments Jake Lodge, principal of Avison Young Hungary.

“In addition to managing such a building, it is a remarkable task to oversee the renovation to meet the expectations of Budapest’s top companies. It will be targeted as a boutique office building providing best-in-class office accommodation in historical settings located in the upmarket Andrássy út,” Lodge adds.

Commercial redevelopment has contributed to the rebirth of city infrastructure, enabling the renovation and preservation of listed buildings in the historic center and enhancing the atmosphere and look of Budapest.

However, the permitting and development can be protracted in this area of the city, which acts as a deterrent to developers and investors. 

Total modern office stock in Budapest now stands at approaching 4 million sqm according to the Budapest Research Forum, which is made up of CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL, and Robertson Hungary.

New supply expectations for 2022 represent a sizable 276,000 sqm as several projects scheduled for this year have been delayed, says CBRE. There is currently around 450,000 sqm of space under construction, according to the consultancy; Cushman & Wakefield puts the projected pipeline at 356,000 sqm.

This article was first published in the Budapest Business Journal print issue of December 3, 2021.

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