Experts participating at Portfolio's recent FM & Hybrid Office conference in Budapest discussed the present and future of the office market. The past 18 months have started a multitude of changes as WFH, the sub-leasing of office space, the change in internal configurations, the return to offices, sustainable management and changing tenant requirements have led to a substantial transformation in the lives of office market players. Experts agree that hybrid office use is currently the most likely outcome, as only a few businesses have adopted WFH full-time.
Panel moderator Gergely Ditróy, Head of the Property Division at Portfolio, asked participants about examples they have seen, and also whether they expected office workers to fully return to office buildings or on the contrary, home office to become the dominant format in the future.
Kata Mazsaroff, Leasing Director at Horizon Development, said businesses had to offer a working environment in which employees enjoy being, and then offices could indeed have a future. We are moving towards hybrid work. There have been examples of 100% home office, such as Vodafone in Miskolc, but the company retained its Budapest office. In another example, an IT and telecom company had a call centre in India that could not be transitioned to working from home, so the unit was closed and the company is now looking for a site in the CEE region.
As employers are looking at overall costs, rental and operating costs combined, monthly expenses of Hungarian businesses are still below the regional average. Some are focusing on optimising costs, while others on employees, Mazsaroff added. In the latter case, they know they have to pay some extra costs. If a developer offers experience-based services, these will be incorporated into costs. Facility management also plays a huge role in sustainability, she said. Preserving value is a key factor, but cooperation among market players is also an important aspect.
According to Mátyás Gereben MRICS, Country Manager at CPI Hungary, offices will definitely be needed, but the exact amount is still an open question. Moving towards hybrid solutions is most frequent in the IT and SSC sectors.
SSCs have said they had increased their efficiency by 10% to 15% during the pandemic. There was also a customer who wanted to have its headquarters built by CPI, but then eventually returned even the 8,000 sqm rented at the end of 2020, Gereben said.
The discussion also covered facility management costs, with Gereben saying the problem was that tenants had become accustomed to a certain price level, which is why costs were now under various other labels. Even though the total is higher, the fact that facility management costs themselves have not increased look better in comparison. In regional comparison, facility management costs are similar in the CEE region, while office lease rates are 15% lower than in Warsaw or Prague.
Ferenc Kis-Szölgyémi, CEO of B+N Referencia Zrt., emphasised that we used to calculate with 7 or 8 sqm of office space per employee, but this is expected to increase. He would invest in a fit-out company in the future.
As for facility management, Kis-Szölgyémi expects the owners of office buildings to queue up. It will be hard to find a quality service provider in Budapest or to the west of Hungary. Also, working from home in Budapest is difficult because homes have not been designed for this. As a result, businesses are expected to try and bring back employees to a safe environment. He talked about customers who spent double the normal FM costs during the COVID-19 pandemic as employees had to come into the office to work and this meant extra disinfection costs.
According to Kis-Szölgyémi, at the current technological level robots can be used to clean large areas and to collect data. Robots cannot yet solve the labour shortage completely, which is why the minimum wage should be raised. A minimum wage matching that in Austria could stop those working in facility management from going abroad to work or could lure them back to Hungary. The lack of these workers will cause huge problems.
László Vágó, CEO of NEO Property Services Zrt., is not envisioning a dynamic price boom at present but said that he believes the current 8 to 10 sqm office space per employee will grow and will probably double, so that office space per employee will be closer to 20 sqm. There has been an increase in the amount of fit-out work, but at present, he does not see the amount increasing due to new leases.
Speaking about the facility management market, Vágó highlighted that it has again proven crisis-proof. As for service costs, which also include other costs on top of facility management, these are roughly the same in the CEE region, although they might be slightly lower in Slovakia, he said.
