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News Release

Budapest

Will we continue to see major office relocation projects?

Office relocations being driven by the opportunity to deliver significant cost benefits are emerging as a new trend on the Budapest office market


Budapest, March 13th, 2009 - The ability to deliver cost savings and office space efficiency are one of the key criteria in the large occupiers’ office relocation – based on the experience of Jones Lang LaSalle. A number of large occupiers are monitoring the office market to find the most efficient solution to merge or relocate their Headquarters. Consolidation from the older, out-to-date office buildings not only renews the business environment of the companies, but changes the working practices in most of the cases. In many cases the older buildings’ fit-out is mainly cellular which will be less efficient in today’s open-plan working environments. Based on statistics of Jones Lang LaSalle, the large occupiers (more than 15,000 sq m) can save up to 20% of their office spaces when relocating to new office buildings and annual cost of office lease and running costs can be reduced by 10-15% in the new, more efficient buildings.
As businesses continue to develop their CSR (Corporate Social Responsibility) policies, sustainability and green solutions gain more importance. Solar and geothermic energy, grey water recycling and other environmental-friendly benefits can support the cost saving efforts.
Due to the high new supply delivered last year, the office vacancy rate increased to 13.9% therefore occupiers have more opportunities to select the ideal location and leasing terms. This trend is expected to continue as new supply may reach record levels in 2009.
K&H Bank’s Headquarter relocation project was among the pioneers on the Budapest market in terms of lease consolidation. This was the largest office consolidation project on the Budapest office market and was concluded in 2008 but the process started long before the lease signature. Jones Lang LaSalle’s Tenant Representation and Project Development Services departments were appointed to prepare a strategic real estate consultancy study for K&H Bank in 2007. The aim of the study was to investigate on the feasibility of a consolidation of the Bank’s six office locations, spread around the city of Budapest. The examination included technical and financial aspects as well as a focus on timing of the project.
The project – ever since the beginning – enjoyed great real estate attention, a 45,000 m2 office pre-lease transaction strongly and rapidly activated the real estate market.
During its almost 10 month time span, the requirement of the Bank continued to evolve, the result still being the biggest office requirement ever on the market.
 
The Bank intended to search for a new HQ that is built-to-last and the maintenance costs can be kept at reasonable level – even in the future. The new HQ will be a LEED certified building, with an aim to reach the golden level. It was an absolute and non-negotiable requirement of the Bank, on which no compromise was allowed. K&H Bank, as a pioneer on the Budapest office market, will be a proud occupier of the “greenest” building in Budapest.
 
The requirement itself has changed and was fine tuned many times, which resulted in the first campus-type of HQ project in Hungary, accommodating close to 45,000 m2 of class ‘A’ office space in two separate buildings named “K” and “H” in Millennium City Centre, developed by TriGránit.
 
Thierry Delvaux, Managing Director of Jones Lang LaSalle, said: “We are extremely proud of the transparency and confidentiality of this transaction. The entire transaction, from the tendering all the way to project completion, had very clear objectives and all milestones of the project ended with a common agreement of the decision making board”.

Maria Starmann, Head of Tenant Representation, added: “Each and every step of the project was documented and the final decision was based on a detailed and objective scoring system of the project team and the top management of the Bank. We strongly believe that – besides the very professional HQ project team of the Bank – these elements have greatly contributed to the completion of the transaction in 2008, delivered fully on time schedule. The HQ project team was a handful of professionals from various business segments, all of them having a reliable real estate back up”.
K&H Bank’s Headquarters project is the first outstanding example for the recently started office consolidation projects.  However 2009 is expected to be the year of cost saving, we expect the office leasing market will see continued activity through the year with large occupiers’ office relocations.