FM newsroom – office, hotel, Budapest. Hundreds of thousands of square metres of office space are expected to become available in Budapest after public organisations move to other offices. This change is an excellent opportunity for the owners to renovate and increase the value of the property or to create a new function, such as an apartment or a hotel.
Vacant buildings should not be left fallow
Public and government organisations will be moving out of a number of city centre buildings over the next two to three years, creating a new situation in the office market at a time when office-use is undergoing a complete transformation. Landlords will have to do something with the space that is freed up. This will surely require a financial sacrifice, but it is also an opportunity to give a boost to the development of the property in question, to convert it into apartments or even more so into a hotels – suggests Realista.Ingatlan.com, referring to the June situation assessment of the consulting company Newmark VLK Hungary.
Developments have already taken place in Western Europe and the United States, but also in Budapest, where an office building partially became a hotel.
“These empty buildings should not be left fallow because they are usually well located for business. A large part of them were not built for office use, but if the owner decides to keep the office function, he will have to invest quite a lot to meet the latest technical and environmental requirements, including ESG aspects. (…) But as there are very few new buildings, this fact could be a catalyst for the office market and lead to the start of building developments in the next period that will be able to accommodate these multinational tenants in 3-4 years’ time,” – says Valter Kalaus, managing director of Newmark VLK.
Functional real estate developments
According to the consulting company, the uncertainties in the office market can encourage the owner to create a new function, because demand is strong primarily in the hotel market but also in the residential market. However, it should be taken into account that it is technically easier to create smaller units in buildings in the city centre that are currently used as offices than in new office buildings built in districts on he outskirts, simply because the technical parameters are different.
Based on the May hotel industry forecasts from STR (Smith Travel Research), RevPAR (revenue per available room) in European markets is expected to grow by 5.1 percent in 2024 and a further 2.8 percent in 2025. Growth is forecasted to continue in the years thereafter, of course differentiated for each local market.
These trends underpin the demand for three and four-star hotels. As greenfield development opportunities in the city centre have run out and there are no vacant sites, hotel developers have turned to other types of buildings, such as office or residential
Róbert Székely, the company’s hotel market expert, mentioned as a new element that nowadays long-term leases have also appeared, which give the owner more security. This could also lead to a major change in the market!
“In the office market, the majority of tenants usually sign contracts for 3, 5 or even 7 years. In hotels, we are talking about up to 20-30 years, and the building will have a single tenant, which is much easier to manage than keeping it as an office with many tenants there at the same time for different periods.” – Székely pointed out.
The process could lead to more hotel brands, more hotel products and of course more tourists, which could boost tourism and infrastructure development.
