What were once widely called shared service centers now tend to be termed business service centers to indicate that they provide higher value-added services taking more business-related decisions, according to KPMG.
As the role of BSCs develops, their office requirements are becoming more sophisticated in line with more complex staff and ESG requirements, as is generally the direction of travel in the high-end office markets.
“The general trend in Hungary is that transactional actions are either outsourced or being automated, which in turn leads to an increased number of value-added activities coming within the scope of BSCs,” says Hipa.
“With these tendencies, the SSC (or BSC) concept is continually expanding its palette with complex financial, sales, marketing, information technology and human resources activities being taken on,” the agency adds. Hungary has more than 200 BSCs and more than 70,000 predominantly highly skilled workers, making the country a leading global business services center in the CEE region, Hipa says.
“The figures tell a tale of rapid success and a good chance for more development as customers bring ever more high value-added functions to the country,” Hipa says in a recent report made in association with the American Chamber of Commerce and ABSL Hungary, the Association of Business Service Leaders in Hungary.
Concerning the quality of the office supply, which can meet demand, developers are going ahead with ongoing Budapest projects. This is despite geopolitical and economic concerns, as well as issues surrounding longer-term letting and demand, office working practices, rising development and construction costs, increasing maintenance and energy costs, and more expensive debt finance.
According to Valter Kalaus, managing partner of Newark VLK, location is critical from the tenants’ perspective. The office should be easily accessible, and its design tailored to the needs of the people based there, providing the right conditions for efficient working. Today, it is also a standard expectation that staff should not have to travel long distances to reach services such as restaurants, cafés and shopping facilities during a break or after work.
The Váci Corridor in District XIII is still Budapest’s most favored development destination, attracting several BSCs and SSCs. The area’s direct access to the M3 metro has been instrumental in becoming the leading Budapest business district. In addition to offices, a number of residential projects have been delivered in the area, which also provides easy access to commercial centers. The corridor has a stock of around 1.1 million sqm with a pipeline of 98,000 sqm and a vacancy rate of 12%, according to CBRE.
In a recent significant business services sector transaction, ExxonMobil established its Global Business Center by leasing the whole of the 29,000 sqm Pillar office building close to Váci út. The Leed “Platinum” accredited complex was designed by Zoboki Design and Architecture specifically for ExxonMobil. The multinational oil and gas major employs as many as 2,000 people in the country.
Sustainability accreditation from an independent, third-party organization such as the U.K.-based Building Research Establishment Environmental Assessment Methodology (Breeam), the U.S.-based Leadership in Energy and Environmental Design (Leed) or, increasingly, the Well Building Standard, have a range of requirements regarding interiors, are now the norm for high-end office developments and a basic expectation from international tenants and staff.
The design, development, and property management of offices align with sustainability and ESG requirements and are in response to tenant and staff demands. It considers issues such as the office environment, layout and design, the provision of amenities and the internal atmosphere regarding staff well-being and, by extension, increased productivity and retention.
German automotive parts supplier Kostal Group has established its global business services center in Budapest, with DVM group supervising the design.
“Sustainability has become a key element of the design, with lots of plants and natural materials being the striking elements. We have created attractive spaces where colleagues feel at home, inspiring collaborative thought while also providing an opportunity for reflection,” comments Ida Kiss, the international account executive at DVM and its former director of design.
Next year, consultancy CBRE anticipates delivery of 100,000 sqm while the 2026 pipeline is 256,000 sqm, a large proportion of which is preleased. In addition, CBRE has traced a further 13 projects with a volume of 213,000 sqm where planning is at an advanced stage.
Total stock in the Budapest office market has reached 4.3 million sqm, according to the Budapest Research Forum (which comprises CBRE, Colliers, Cushman & Wakefield, Eston International, iO Partners and Robertson Hungary), about 3.5 million sqm of which was developed on a speculative basis.
The vacancy rate in the Budapest office market is expected to rise to about 14% this year, according to CBRE. However, from a positive perspective, there is a perceived demand for quality office space, and the higher vacancy rates tend to be in older stock that does not meet more complex tenant requirements or increasingly stringent ESG and sustainability expectations.
In this way, it can be argued that there is a widening gap between new and sustainability-accredited offices and older, outdated stock. In reaction to this, some landlords are looking to upgrade earlier-generation buildings to meet the new requirements.
This article was first published in the Budapest Business Journal print issue of November 15, 2024.
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