Click on the image to open the gallery
How do you currently assess the state of the Budapest office market? Based on which indicators can - or rather should - it be evaluated?
When analysing the office market, one of the most important questions is what proportion of their available office space investors are able to lease out. This fundamentally determines the return on office investments, which is, of course, also influenced by rental rates and achievable yield levels. The two factors are closely linked: if occupancy is high, landlords are in a stronger bargaining position and can therefore command higher rents. If, however, the proportion of vacant space is significant, tenants are in a more favourable position, which can put downward pressure on prices. According to the National Bank of Hungary’s commercial real estate market report, the vacancy rate in the Budapest office market stood at 12.5 percent at the end of 2025, which was 1.6 percentage points lower than a year earlier. Based on first-quarter data from the Budapest Research Forum (BRF), vacancy declined further to 12.0 percent. This is not considered an exceptionally low figure, as the historical average is around 13.3 percent; however, it indicates that the market appears to be stabilising again after the difficulties of recent years.
What factors have shaped office market demand and vacancy rates in recent years?
The performance of the office market has traditionally been closely linked to economic cycles. When the economy grows, companies expand, employ more people, and therefore require more office space. This was clearly visible between 2012 and 2020, when the Hungarian economy followed a sustained growth path and vacancy rates continuously declined. The turning point came in 2020. This was driven not only by the series of crises that followed the pandemic, but also by the widespread adoption of home office arrangements in the wake of COVID-19. Many companies realised that they could operate with less office space and thereby achieve significant cost savings. Over the past one or two years, however, a new trend has emerged: more and more companies are requiring employees to return to the office, expecting greater efficiency, better cooperation and faster decision-making from in-person work. This partly explains why vacancy rates have started to decline again.
How does Budapest compare with its regional competitors?
The developments seen in Budapest are not unique, as the spread of home office work and economic uncertainty affected office markets throughout the Central and Eastern European region. During the first half of the 2020s, vacancy rates increased in virtually every regional capital city. At the same time, last year already brought a turnaround in several locations. In most regional capitals—with the exception of Bratislava—vacancy rates declined. Budapest’s current vacancy rate of around 12 percent is broadly in line with those of Bucharest and Sofia, while vacancy in Bratislava is somewhat higher. The tightest office market in the region is clearly Prague, where the vacancy rate stands at just 5.9 percent. Warsaw is also in a favourable position: although its vacancy rate is higher than Prague’s, it remains lower than that of most regional competitors.
Experts say that one of the most important factors in the coming period will be the emergence of new office stock. Do you agree with this statement?
According to the National Bank of Hungary’s data, around 426,000 square metres of office construction was underway in Budapest at the end of 2025, which corresponds to nearly 10 percent of the total stock. This is a significant development volume even in regional comparison. At the same time, it is important to note that a portion of these projects will be purchased by the state in turnkey condition, and various government institutions will move in. In the short term, this only has a moderate impact on the leasing market, as it primarily involves the relocation of existing public sector tenants. In the longer term, however, it may lead to a significant oversupply if the vacated, typically older state-owned properties enter the market in larger numbers. This also highlights that we are not actually talking about a single office market. Demand for modern, energy-efficient, state-of-the-art buildings is fundamentally different from demand for older, technologically and energetically outdated properties. Higher-quality buildings will continue to find tenants more easily, while older office buildings are expected to maintain persistently higher vacancy rates.
What do you think, what impact could a change of government have on the office market?
The new economic policy is expected to differ from the priorities of the previous period. Instead of the earlier strongly industry-focused approach, greater emphasis may be placed on the service sectors, as well as on Western European and American investors. In this process, Poland may serve as a model, where service centres and business services have shown significant growth in recent years. If a similar development path unfolds in Hungary, more service centres and companies engaged in high value-added service activities may emerge. These companies will primarily look for locations in Budapest, but in favourable cases larger regional cities may also benefit from the process. From a macroeconomic perspective, this represents service exports, while from an office market perspective it means increasing demand, which may reduce vacancy rates and improve landlords’ bargaining positions.
A few years ago ESG seemed unavoidable, but today we hear much less about it. What is happening in the market in this regard?
Multinational companies in the service sector are no longer simply looking for office space, but for buildings that also meet sustainability and energy efficiency requirements. This means that demand is increasingly concentrated on modern, ESG-compliant office buildings. Accordingly, this trend is expected to strengthen further in the coming years. A particularly important milestone may be 2030, when many companies have set carbon neutrality targets. As a result, there may be excess demand in the premium, low-emission office segment. This could open up space for new investments and also encourage the refurbishment of existing building stock. In particular, office buildings constructed 10–15 years ago, once considered A-category, may realistically be renovated, while part of the older B-category stock may undergo functional conversion, for example into residential units, student housing or hotels.
How do changes in financial markets and the interest rate environment affect the office market?
One important development of the recent period has been the decline in risk premia. As a result, Hungarian government bond yields have fallen significantly, with the ten-year yield declining from around 7 percent to approximately 5.3 percent. The improved investor sentiment has also been reflected in the strengthening of the forint, which may provide greater room for monetary policy. From a real estate perspective, this has several positive effects. Lower interest rates increase the present value of future rental income, thereby raising the value of office buildings. In addition, financing conditions become more favourable, improving the profitability of both new developments and refurbishment projects. The competitiveness of real estate investments may also strengthen, creating a more favourable environment for real estate funds.
What role could artificial intelligence play in the future of the office market?
The impact of artificial intelligence is still difficult to quantify today, but in the longer term it may become one of the most important factors. For business service centres and other service industries, one of the main advantages of AI is cost reduction. Many routine tasks can be automated, which may reduce labour demand. From the perspective of the office market, this means that while the expansion of the service sector may increase demand for office space, the spread of artificial intelligence may partially offset this effect. Therefore, it may pose a medium-term risk to demand growth. Overall, however, I believe that the Budapest office market is facing a significant transformation. Demand for modern, sustainable and technologically advanced office space is expected to increase, which may generate new investments and refurbishments. A part of the older building stock may be converted or repurposed, while vacancy rates could fall below 10 percent. In the longer term, however, the spread of artificial intelligence will be a factor that fundamentally shapes the future of the service sector and, through it, the office market.
