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Green Accreditation the Norm for Budapest Offices

Green or sustainability accreditation is a prerequisite for the successful development of office projects in the quality strata of the Budapest office market; the number of certified office buildings and the certified office area has tripled over the last three years. 

Eifel Palace interior.

Regional developers such as Skanska, Atenor, GTC, HB Reavis and CPI have common sustainable development policies across CEE and Western Europe. Further, Hungarian developers such as Wing, Futureal and Horizon Development have standard sustainable development strategies. 

Under the certification system, the sustainability of a building is verified by an independent assessor using standard and common international criteria.

“Green building certification is now a market standard: all major office buildings in planning or under construction are targeting green building certification,” said Colliers International.

More than 1.1 million sqm of office space on the Budapest office market is green certified according to Colliers International. This compares to 200,000 sqm in 2012, after sustainability accreditation arrived on the market in 2010-2011. Around one-third of the office stock in Budapest is green certified.

However, on a building basis, the ratio of sustainability accredited space is much lower as to date 58 buildings have been certified, representing about 15% of the market. With 12 office buildings currently under construction consisting of 270,000 sqm of space that is due to be delivered in 2017-2018, green office space will increase by a further 30% according to projections by Colliers. By way of a comparison, in the Prague office market, 16% of buildings are sustainability certified and 30% of the floor space is certified.

Conforming to sustainability requirements and making a profitable return on investment is now certainly seen as part of the same process. This benefits developers and building owners who have resulting higher returns by attracting or maintaining tenants, while at the same time minimizing the wider environmental impact of buildings. From the tenant perspective, the benefits are increased efficiency and an improved working environment for staff.

Making People Think

“Green has made people think, change some of the details and spend more time documenting, but it has not actually changed the buildings that much,” comments Michael Smithing, head of landlord representation and LEED appraiser at Colliers International Hungary.

“Developers get extra points for providing extra light and good views, but in Hungary you cannot lease a building if it does not have good natural light. However, there is a greater focus on making them green, which we did not talk about ten years ago. They are now a little more economical and they are going to be better for the earth. What we have seen, for example, are discussions about tenant density. This is a key factor when marketing a building,” Smithing adds.

“The BREEAM assessment method provides an independent means of assessing environmental impacts associated with construction projects,” insists Martin Earl, a licensed BREEAM international assessor based in Warsaw. He says buildings are assessed “at the design, construction, initial occupation and refurbishment stages in a consistent way against a fixed set of criteria.”

Pál Baross, director of the campus development office at the Central European University (CEU) and an experienced sustainability accreditor, says aspects such as location, energy saving concepts and building management systems that, for example, monitor energy usage and the provision of natural light, all play a role.

“Sustainability elements are essentially utilized to raise the standard of new buildings and upgrade older buildings to meet the requirements for green building development and sustainable property management. Green elements need to be incorporated from the design stage and developers, architects, cost consultants and financers need to coordinate their roles from the inception of a project,” he explains.

Commonly Used

The most commonly used certification organizations across CEE are the U.K.-based BREEAM (Building Research Establishment Environmental Assessment Methodology) and the U.S.-based LEED (Leadership in Energy & Environmental Design). In addition, a much smaller minority of office buildings have been certified by the DGNB accreditation system, favored by German speaking countries. LEED introduced a stricter LEED v4 rating system in the fall of 2013, while BREEAM updated its rating systems last year.

According to Colliers, there is almost twice as much space certified under BREEAM than LEED in in Hungary. This applies to both existing building certifications and new building certification.

Horizon Development, in partnership with the investor, Erste Open-ended Real Estate Fund has been awarded both LEED “Gold” and BREEAM “Very Good” accreditation for its 25,000 sqm Promenade Gardens office project on Váci út, scheduled to be completed in 2018. The Hungarian developer also achieved dual LEED and BREEAM accreditation for the Eiffel Palace development, which has twice been purchased by investors over the last three years.

“Meeting the requirements of BREEAM and LEED means an employee friendly, healthy atmosphere for the building users, and reduced stress on the environment by utilizing energy and resource-efficient materials and technologies,” commented Edina Hornok, head of sustainable construction at DVM Group, who designed the projects.

Zsombor Barta, president of the Hungarian Green Building Council (HuGBC) and a BREEAM assessor, sees a small difference between the methodology of each sustainability accreditation organization, resulting mostly from the origin and background of these systems. “Although there are differences, we can see that these systems have established a good market position on the CE market, which shows also the good co-existence of the different schemes. The clients and their preferences decide about the selected system,” he said.

BREEAM for example makes assessments based on nine categories – management, health and well-being, energy, transport, materials, waste, water, land-use/ecology and pollution.

Sustainability elements in a building are generally regarded as adding to its return on investment and capital value and are a must for higher level investors. Further, a good design and the high quality of construction underpinned by green certification ensures the buyer that they should not have to make significant capital investments into the property during its operation. Essentially, investment grade buildings are usually sustainability accredited.

“It is not a prerequisite for an office purchase – it is just preferred by the investor. Although it must be noted that most newly constructed offices have some level of sustainability,” said Tim O’Sullivan, head of investment properties for Hungary & SEE at CBRE.