Budapest’s Office Market at a Strategic Inflection Point

In this interview, Mr. Hubert Abt, Founder & CEO of New Work/workcloud24, explains why rising vacancy is only the visible symptom of deeper demand destruction - and how this disruption is creating both systemic risk and a rare opportunity for investors willing to rethink obsolete office assets.

-    Hubert, for many years the Budapest office market has been described as cyclical. Do you still think this narrative holds?

-    For a long time, the Budapest office market was framed as a classic cycle: demand weakens, vacancy rises, and eventually the market corrects itself. That narrative is increasingly disconnected from reality. What we are seeing today is not a temporary downturn, but a strategic inflection point. The old rules of the office market still formally exist, but they no longer work in practice.

-    What data points best illustrate this structural shift?

-    Budapest currently has around 4.4 million square metres of office stock, with vacancy approaching 18%, while annual take-up has fallen to historically low levels. These headline numbers already look challenging, but they actually understate the true pressure building within the system.

-    One of the risks you often highlight is Budapest’s exposure to Shared Service Centres. Why is this so important?

-    It’s one of the most underestimated factors. Around 40,000 people work in Shared Service Centres in Budapest, occupying roughly 400,000 square metres of office space. These roles—finance, accounting, HR, procurement, customer operations and IT support—are precisely the functions most exposed to automation and agentic AI. AI doesn’t simply improve productivity in these areas; it replaces entire task clusters. Even assuming a conservative 50% consolidation or displacement, that would free up around 200,000 square metres of office space, pushing vacancy up by an additional 4–5 percentage points. That alone would move the market toward 22–23% vacancy.

-    Beyond SSCs, are there other structural drivers of rising vacancy?

-    Hubert Abt: Yes, and arguably an even more powerful one: hidden or shadow supply. A large proportion of Budapest’s office space is still contractually leased under long-term agreements signed before 2020, when growth assumptions and static space concepts dominated. In reality, much of this space is already underused-occupied on paper, but partially or fully vacant in practice. As these leases naturally expire between 2025 and 2028, this shadow vacancy will turn into visible vacancy, inflating market statistics without a single new building being delivered.

-    This challenges the common argument that limited new supply will eventually heal the market, doesn’t it?

-    Exactly. That argument no longer holds. Vacancy in Budapest today is not driven by overconstruction, but by structural demand destruction combined with revealed oversupply. Rent reductions alone cannot clear space that is simply no longer fit for purpose. When you combine SSC contraction, legacy lease expiries and ongoing efficiency gains driven by technology, the market edges toward 25-30% vacancy. At that point, vacancy ceases to be a leasing issue and becomes a systemic credit risk - with weakening cash flows, refinancing challenges, accelerating brown discounts and growing pressure on balance sheets.

-    How is this structural change affecting traditional lease models?

-    Traditional long-term lease structures are under significant pressure. They no longer offer the flexibility modern occupiers require. Companies facing rapid technological change, AI-driven productivity shifts and volatile headcount planning are increasingly unwilling to commit to rigid 7–10 year leases with fixed space and fixed costs. This is precisely why the flexible and serviced office sector continues to grow, even in a weak overall market. Flex operators consistently report significantly higher occupancy rates than the wider office market because they align with today’s demand patterns: variable space needs, shorter commitments, integrated services and rapid scalability. Flex offices are no longer a niche product—they function as a shock absorber in an increasingly volatile and structurally transformed office market.

-    Despite all these pressures, do you see opportunities emerging. 

-    Very much so. Paradoxically, this environment creates a rare opportunity. The timing has hardly ever been better to acquire office buildings that are no longer fit for purpose. Assets trading at discounts to replacement cost can be redeveloped, repositioned or converted into sustainable, energy-efficient and service-oriented products. When executed properly, these transformations can generate 20–30% value premiums relative to undifferentiated assets. These premiums are not driven by branding, but by fundamentals: lower operating costs, improved ESG compliance, stronger utilisation, higher tenant retention and better financing conditions for future-proof buildings.

-    How would you summarise the current state of the Budapest office market?

-    Budapest is not simply overbuilt, it is over-officed relative to an AI-adjusted workforce and outdated lease structures. The real question is no longer when demand will return, but which assets will remain relevant, which will be transformed, and which will exit the market altogether. For investors willing to act decisively, the current dislocation represents a rare window: an opportunity to turn obsolete stock into resilient, sustainable and flexible assets, and in doing so, capture premium value in a profoundly reshaped office market.

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