Quality office space still in demand – BBJ RE Conference with photos
Thursday, October 19, 2006, 15:03
Demand for quality office space is not declining, even though many say there is already an oversupply of office space overall, Adrienne Konthur, managing director of the Hungarian unit of CB Richard Ellis, said at the BBJ’s Real Estate Market Conference today.
She quoted figures form the Budapest Research Forum, a joint body of the Big Five, which show that even more developments than are currently underway could be let out and there is no sign of saturation on the Grade A office market. Oversupply is only expected to come in 2008, when additional office space of 500,000-550,000 square meters will have been built, which will mean prices will inevitably fall and developers will have to compete on added value such as services and infrastructure, she said.
Konthur also mentioned the current trend of small businesses finally moving out of apartments and into proper offices, which results in an increased number of contracts for space less than 200 square meters.
As for international comparison, Konthur said earlier predictions that foreign developers would stay away from the CEE region if the yield premium obtainable here fell below 200bp seem to have proven wrong, as the current yields of 5%-6% on office developments, even though they are above Western European levels only by some 130bp, are still sufficient to attract international investors.
Attila Balogh of Eston International Investment Division gave a brief overview of the planned government quarter project, including its potential pitfalls. He said the sale of current government buildings, 33 primarily downtown properties with combined area of 340,000 square meters, was unlikely in one package as the portfolio included offices ranging from 180 to 25,000 square meters in size. Most of the buildings cannot be used as offices by the eventual buyers and are more likely to be turned into hotels or minimalls, Balogh said.
He added that sites meeting all requirements with regard to location and infrastructure were limited in number, especially since the government wants no ownership in the future offices and this excludes the possibility of PPP schemes.
On a lighter note, Bence Kovács of EEA Architects Budapest spoke about the emerging role of architects as not just stylists but as partners in real estate development projects. As an example, he mentioned a new trend of designers being involved in market research in the planning phases, which helps make more informed go-no go decisions much earlier in the project and also reduces the costs of aborted developments.
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