Budapest Business Journal 3202

VOL. 32. NUMBER 2 | JANUARY 26 – FEBRUARY 8, 2024

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SPECIAL REPORT INSIDE THIS ISSUE

Back to the Office

The Future of Hungary’s Occupational Landscape Consultants across Budapest highlight trends regarding employees’ return to the workplace, hybrid work schedules, what young workers are looking for in a company and its management, the possibility of a four-day workweek in Hungary, and the future of offices.  11

Developers Must Meet Demands of Tenants’ Staff

Successful developers need to meet the staff demands of their tenants along with the additional costs, says real estate editor Gary J. Morrell. Along the way, he discovers that ‘the most modern offices satisfy the most basic biological needs.’  14

Hunting Down Added Value

SOCIALITE

Ernie Kovacs, the U.S. Comedian with Hungarian Parents Born in the United States to Hungarian parents, Ernie Kovacs is quite possibly the most influential comedian of all time with roots in this country. But here, he’s all but unknown, writes David Holzer.  17

NEWS

Lower Inflation to Speed Rate Cuts?

BUSINESS

HIPA has been a ‘serial offender’ when it comes to setting FDI records. Still, even it will have its work cut out to maintain that form in 2024. CEO István Joó walks us thru the highlights from 2023, and looks forward to the year ahead. 8

The year-end brought a positive surprise with inflation data that was more favorable than expected.

The National Bank of Hungary (MNB) might accelerate its interest rate cuts, at least temporarily, Deputy Governor Barnabás Virág indicated at a recent press conference.  3

BUSINESS

CEE Markets Expected to Perform Strongly This Year OTP Bank experts continue to recommend an underweight in stocks and maintaining some exposure to gold. Despite the continued inflation decline, they believe the market has overshot in pricing-in interest rate cuts.  7

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Budapest Business Journal | January 26 – February 8, 2024

IMPRESSUM EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Luca Albert,

Balázs Barabás, Zsófia Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Gary J. Morrell, Nicholas Pongratz, Gergő Rácz.

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The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

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THE EDITOR SAYS

HUNGARY LAST MAN STANDING ON SWEDEN We marked a somber anniversary on Jan. 24, two years since Russia launched its full-scale invasion of Ukraine. What President Vladimir Putin insists on calling a “special military operation” has now lasted half as long as World War I, a conflict that the ground war, at least, increasingly resembles with its trenches, murderous battles over meters of land, and talk of stalemate.

Among the many consequences of Putin’s invasion was the conclusion reached by Finland and Sweden that the Russian leader was no longer a state actor who could be trusted and that their national security was better guaranteed by joining NATO than remaining neutral. In a coordinated move, the two countries duly handed in official application letters on May 18, 2022. Finland’s bid was ratified relatively smoothly, and it became the 31st member of the military alliance on April 4, 2023.

Sweden still waits but has taken a significant step nearer. On Jan. 23, one day before the war’s second anniversary, Türkiye’s parliament approved Sweden’s bid to join. President Tayyip Erdoğan is expected to sign it into law in the coming days.

That leaves Hungary as the only holdout, despite repeatedly saying it would not be the last to ratify. As recently as December, Swedish Foreign Minister Tobias Billström said Hungary had repeated that promise after a meeting with Péter Szijjártó.

To be clear, Hungary’s top politicians have long insisted they don’t have a problem with Sweden joining, suggesting that the real issue is MPs in Parliament, upset by comments Sweden has made on the quality of democracy here.

On the day this issue of the Budapest Business Journal went to print, Prime Minister Viktor Orbán spoke with NATO secretary general Jens Stoltenberg. “I reaffirmed that the Hungarian government supports the NATO-membership of #Sweden. I also stressed that we will continue to urge the Hungarian National Assembly to vote in favor of Sweden’s accession and conclude

the #ratification at the first possible opportunity,” he posted on X (formerly Twitter). Stoltenberg’s reply? “Good call with @PM_ ViktorOrban of #Hungary. I welcome the clear support of the Prime Minister and his government for #Sweden’s #NATO membership.

I look forward to the ratification as soon as parliament reconvenes.”

On Jan. 23, the PM’s press chief, Bertalan Havasi, announced that Orbán had invited Swedish counterpart, Ulf Kristersson, to Hungary to address Sweden’s NATO accession, according to state news agency MTI. According to AP, Billström saw no need to negotiate. “What we hope is, of course, that Hungary will ratify the membership as soon as possible.” Hungary now looks dangerously isolated. International news wire The Associated Press says a vote on Sweden’s accession hasn’t even been put on parliament’s agenda. Unless an emergency session is called, the matter will not go before lawmakers until at least late February. The next move is surely with Hungary. *********** The BBJ was saddened to hear of the death after a long illness of the wife of British Ambassador Paul Fox on Jan. 18. A brief message put out by the embassy said Vicki Fox had died peacefully at home in the United Kingdom, surrounded by family.

“Paul has indicated that he will be returning to Budapest after the funeral and settling back into life here. We look forward to having him back with us; he has been very much missed. He’s mentioned how very much he and Vicki have valued the kind support of friends and colleagues in Hungary over recent months and asked us to pass on his thanks,” the embassy statement said.

The thoughts and prayers of everyone at the BBJ go out to Ambassador Fox and his family.

Robin Marshall Editor-in-chief

Why Support the BBJ? • Independence. The BBJ’s journalism is dedicated to reporting fact, not politics, and isn’t reliant on advertising from the government of the day, whoever that might be.

• Community Building. Whether it is the Budapest Business Journal itself, the Expat CEO award, the Expat CEO gala, the Top Expat CEOs in Hungary publication, or the new Expat CEO Boardroom meeting, we are serious about doing our part to bind this community together.

• Crisis Management. We have all lived through a once-in-a-century pandemic. But we also face an existential threat through climate change and operate in a period where disruptive technologies offer threats and opportunities.

Now, more than ever, factual business reporting is vital to good decision-making.

For more information visit budapestbusinessjournal.com

Photo by István Derencsényi / MTI

• Value Creation. We have a nearly 30-year history of supporting the development of diversity and sustainability in Hungary’s economy. The fact that we have been a trusted business voice for so long, indeed we were the first English-language publication when we launched back on November 9, 1992, itself has value.

Photo by László Bolvári / Fortepan

THEN & NOW In the color photo from state news agency MTI, Gábor Vibrán (left, in red) fights the Kazakh boxer Kenzhe Muratuly in the final of the men’s 54 kg weight category at the 68th István Bocskai International Boxing Memorial Tournament at the Oláh Gábor utca Sports Hall in Debrecen on Jan. 20. Vibrán went on the win. In the black and white picture from the Fortepan public archive, dated 1954, people watch a youth boxing match in progress at the sports ground at Róna utca 86-100 in Budapest.

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Budapest Business Journal | January 26 – February 8, 2024

News

• macroscope

Lower-than-expected Inflation to Speed Interest Rate Cuts?

The year-end brought a positive surprise with inflation data that was more favorable than expected. Due to the lower index, the National Bank of Hungary (MNB) might accelerate its interest rate cuts, at least temporarily, Deputy Governor Barnabás Virág indicated at a recent press conference.

ZSÓFIA CZIFRA

December’s inflation data outperformed the expectations of analysts: while their consensus was for a reduction of around 6%, consumer prices were, in fact, only 5.5% higher in the last month of 2023 than a year earlier. Such a level had not been registered since June 2021.

Compared to the previous month, average consumer prices decreased by 0.3%, according to data released by the Central Statistical Office (KSH).

Compared to December 2022, a price rise of 4.8% was recorded for food, which last happened in September 2021. Within food, the highest increase was for sugar,

up

42.1%,

with 17.2% for chocolate and cocoa, 16.1% for non-alcoholic beverages and 14.1% for coffee. Electricity, gas and other fuels became 13.9% cheaper.

From November 2023, however, food prices decreased by 0.1%.

Inflation in EU Member States (December 2023)

December 2022-December 2023: 12-month change in consumer prices.

Source:

A Pleasant Surprise

The fresh data is a pleasant surprise, according to Erste Bank analyst János Nagy. He recalls that food products showed a decrease of 0.1% on a monthly basis, so their annual index was 4.8%.

Vehicle fuel prices fell further (by 3.6% on a monthly basis), once again providing substantial support for continued disinflation.

Less good news from the point of view of the persistence of disinflation is that service inflation actually rose by 0.6% in December. This is considered

All Eyes on the MNB

According to Erste’s Nagy, the MNB is expected to cut the base interest rate by another 75 basis points at its first meeting this year to 10%. Although the issue of more aggressive interest rate cuts may flare up again due to the current data, the suffocation of disinflation expected in the spring will probably force the central bank to reconsider the interest rate cut strategy around March, so further acceleration is not viable until then, according to Nagy.

“The latest inflation data confirms the previous expectations about the ongoing disinflation processes and enables monetary policy to continue the loosening cycle that has begun and to reduce interest rates further at the current pace,” Horváth argues.

Czech Republic Romania Slovakia Poland Austria Hungary Croatia Bulgaria Estonia France Slovenia Germany Malta Greece EU Spain Luxembourg Ireland Eurozone Sweden Portugal Cyprus Lithuania Finland The Netherlands Latvia Italy Belgium Denmark

Comparing last year overall to 2022, consumer prices were up by 17.6% on average, within which the highest price increase of 25.9% was seen in food. A price rise of 22.1% was recorded for electricity, gas and other fuels, 18.6% for other goods, including motor fuels and lubricants, 15.4% for alcoholic beverages and tobacco, 13.2% for services, 8.3% for clothing and footwear and 5.6% for consumer durables.

Consumer prices increased by 18.3% on average among pensioner households.

Core inflation (which strips out the more volatile prices for food and energy) was put at 7.6% in December, down from 9.1% when measured year-on-year but up 0.2% compared to November.

MBH Bank head analyst András Horváth takes a slightly more optimistic view. He agrees that the increase in the price of alcohol and tobacco products, as well as the price increase that can still be observed in significant sections of the services sector, moderates the process of the decrease in inflation.

However, overall, and despite the increase in the excise tax on fuels at the beginning of 2024, this year’s annual inflation rate may be 4.1%, and in the third quarter, it might reach 4%, which would be within the central bank 2-4% target band for the first time. That said, the repricing decisions made by market participants in the first two months of the year may carry risks, Horváth acknowledges.

a seasonally high value for the last month of the year. On an annual basis, service prices rose by 8.1%, Nagy says.

“The combination of the slightly decreasing price index and the still supportive base effect again brought a significant decrease in the annual index,” Nagy says. “At the beginning of this year, the supporting role of the base effect persists, and it is expected that, despite the already much higher monthly price increases, which will be driven by the increase in the excise tax in addition to the revaluations at the beginning of the year, the annual index may slow down further,” he believes.

Thus, annual inflation might drop below 5% as early as January, but it will probably not last at that level.

As the supporting base effect wears off, the annual index may return to

above

5%

in the second quarter at the latest, and is expected to remain there for the rest of 2024. Slightly increasing or stagnant figures may be published throughout the year, starting from spring.

The analyst cautions that it is uncertain whether December 2023 or December 2024 will have the lower value.

“Based on the currently available information, there are just as many arguments in favor of lowering interest rates by 75 basis points or 100 basis points at the interest-rate meeting at the end of January.”

The Monetary Council will meet to decide on interest rates for the first time this year on Jan. 30.

“Based on the currently available information, there are just as many arguments in favor of lowering interest rates by 75 basis points or

100

basis points

at the interest-rate meeting at the end of January,” Deputy Governor Barnabás Virág said at a Euromoney conference in Vienna recently.

As international newswire Reuters noted, Virág was indicating that the central bank could speed up the rate of monthly interest rate cuts from the 75 basis points cuts it has used in recent months. But Virág also stated that, even if this acceleration takes place, it would only be temporary, for one to three months. Regarding the time interval for the acceleration to the 100 basis point cut, he said: “I think it would be too early to judge because it depends on the data.”

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Budapest Business Journal | January 26 – February 8, 2024

Multifunctional Center to be Developed at Puskás Metro

Real Estate Matters A biweekly look at real estate issues in Hungary and the region

The Centrale, a multifunctional complex by the Hungarian outfit Chain Bridge Ventures, will be developed at the Puskás Ferenc Stadion metro station. The 29,000 sqm project will provide service space, food and beverage outlets, an office center and a hotel at the residential and commuter hub.

Main photo shows an artist’s rendering of the Centrale development. The file photo below, from 2021, gives a good idea of how busy the area is. The smaller Papp László Sportaréna is in the center, with the larger Puskás Aréna behind it.

GARY J. MORRELL

Chain Bridge Ventures is a newly established boutique developer formed by partners with experience as investors.

It says the Centrale project has been in active preparation since 2017.

Centrale will be located at the intersection of Kerepesi út and Hungária körút where more than 100,000 vehicles and

70,000-plus pedestrians

Photo by Kurka Geza Corey / Shutterstock.com

use the intermodal transport hub on a daily basis, according to the developers. The site is at the center of the residential Districts XIV, X, and VIII and adjacent to the Puskás Aréna (the national stadium) and the Papp László Sportaréna.

The complex, designed by Bánáti + Hartvig Architects, will include 40 shops and service outlets on a 6,000 sqm area on the ground floor, including a supermarket, drugstore, pharmacy, banks, telecoms, FMCG and beauty services. A 2,000 sqm F&B area will be located on the second level. Above the commercial center will be an office tower of about 5,000 sqm on three levels. There will also be a 170-room, 4-star hotel and parking capacity for 1,000 plus vehicles.

High-level Certification

The developers say they are aiming for a “high-level” Breeam certification. The complex will include a 7,000 sqm landscaped green roof.

The company founders and investors are financing the project in addition to loans from Hungarian banks.

“Already back when the Papp László Sportaréna redevelopment was announced [in 2000] and [it was obvious] the football stadium would have been redeveloped sooner or later, I realized that the area has great potential,” says Michael Gagel, partner at Chain Bridge Ventures.

“Seeing the dilapidated state of the [old] Puskás Ferenc Stadion and buildings, I had the vision of extracting value out of otherwise disused land on top of a public transport site, as is popular in modern cities around the world,” he explains.

“I began to implement this vision, but it has been a very long road and complicated process due to the legal, legislative, and technical nature of this project, involving numerous public stakeholders. Putting this puzzle together needed a lot of vision and perseverance; luckily enough, all involved parties understood the vision and the need to drive this site forward for the sake of the public realm and the major public investments that occurred and will occur in this area,” Gagel adds.

Public Benefit

The developers emphasize a significant public benefit through infrastructure improvements in their plans to redevelop the Puskás Ferenc Stadion metro station entrances. In doing so, both passenger comfort and evergrowing capacity needs will be elevated to meet the modern requirements of this continuously developing area, Chain Bridge Ventures insists.

“In response to the challenges of modern living, we offer a unique mixed-use solution that stands out from traditional shopping centers and standalone office and hotel assets,” says Beni Gagel, also a partner at Chain Bridge Ventures.

“Putting this puzzle together needed a lot of vision and perseverance; luckily enough, all involved parties understood the vision and the need to drive this site forward for the sake of the public realm and the major public investments that occurred and will occur in this area.”

“The carefully put together mixeduse elements will be a rare example of where the ‘sum of the parts is greater than the whole.’ I can report that, although we have been in a challenging economic environment, the market and potential tenants that we have discussed the project with have all understood its power and future potential,” he argues.

“This has allowed us to achieve a nearly 50% pre-lease even before we had a building permit in place. We will make further announcements on this in the near future,” Beni Gagel adds. Chain Bridge Ventures expects to complete the project in 2026.

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Budapest Business Journal | January 26 – February 8, 2024

News | 5

Progress on Ukraine Funding Ukraine and Sweden’s NATO Bid? Crisis Roundup Hungary continues to press for annual reviews of the Ukraine Facility, the European Union’s proposed instrument to provide financial support to Ukraine, in which the EUR 50 billion in aid would be distributed over four years, Minister of Finance Mihály Varga reiterated to his EU peers at a meeting in Brussels on Jan. 16.

NICHOLAS PONGRATZ

This way, Varga suggested, the European Commission could review Ukraine’s need for resources and decide on the following year’s disbursement based on that assessment, he added.

“We ended the meeting with the hope that, when a final decision on the instrument is taken at an EU summit on Feb. 1, Hungary’s proposals will also be weighed,” Varga said. “Efforts must be made, as up to now, to work on a solution that is acceptable for all member states.”

Prime Minister Viktor Orbán made a similar suggestion during a press conference with his Slovak counterpart Robert Fico the same day when he said that the money used to support the beleaguered country should not be diverted from the EU budget.

“If we want to help Ukraine, which I think we need to do, we have to do it in a way that doesn’t harm the EU’s budget,” Orbán told a news conference. “But to

give away

EUR 50 bln

from the EU budget for four years in advance is a violation of the EU’s sovereignty and national interests.

We do not even know what will happen in a quarter of a year.”

Minister Gergely Gulyás, head of the Prime Minister’s Office, at his regular Government Info press conference on Jan. 18. Photo by Tamás Kovács / MTI. Some allies continue to vent their frustrations about Orbán’s unwillingness to provide what they consider to be essential support for Ukraine. For instance, one U.S. State Department official expressed his disappointment with Hungary’s approach to Ukraine thus far.

“I think we’re disappointed that [...] Prime Minister Orbán has chosen to stand alone in the European Union in questioning the fight to support Ukrainians,” Jim O’Brien, the U.S. State Department’s Assistant Secretary for European and Eurasian Affairs, told a Zoom briefing.

Arguing for Consensus

Meanwhile, others continue to work on swaying Orbán toward consensus.

Bloomberg News reported that Italian Prime Minister Giorgia Meloni had been making such overtures to Orbán, suggesting in return that his governing Fidesz party might join the far-right European Conservatives and Reformists European Parliament political group alongside Meloni’s Brothers of Italy. According to the report, Meloni is also urging Orbán to shift his stance on Ukraine’s EU membership aspirations and re-establish closer ties with Kyiv to join the ECR. Yet, one leading politician believes that persuading Orbán will not be so simple, given the precedent set at the last EU summit.

“I know Viktor Orbán well [...] it won’t be easy to convince him,” Luxembourg’s Foreign Minister Xavier Bettel, who was previously his country’s prime minister, said on Jan. 23. He explained that the EU

disbursing

EUR 10 bln

in frozen funds to Hungary in a veiled effort to garner support from Orbán just prior to the bloc’s decision on Ukraine was poor judgment.

“We cannot give the impression that to have a common position means to pay (Budapest),” he said. “This is not a good precedent.”

Others seek to punish Orbán by moving one step closer to suspending Hungary’s vote in the EU. On Jan. 12, some 120 of the European Parliament’s 705 members signed a letter calling for the invocation of the EU Treaty’s Article 7 against Hungary for what they see as Orbán’s transgressions.

“Hungary has repeatedly been criticized for abandoning the principles of the rule of law, and, especially after Hungary’s actions in disrupting the decisionmaking process at the European Council in December, we believe that it is time for the European Parliament to act,” the appeal says. “We believe that this is a necessary step towards protecting the values of the EU, as set out in the Treaty on European Union.”

Swedish Roadblock

In other Ukraine-related news, one of the direct consequences of Russia’s invasion was to persuade previously neutral Finland and Sweden that President Vladimir Putin was no longer a state actor who could be trusted and their security was better guaranteed by joining NATO. Any such application requires the agreement of all member states.

Finland joined on April 4, 2023, but Hungary and Türkiye have held up Sweden’s bid.

On Jan. 23, one day before the second anniversary of the start of Russia’s full-scale invasion of Ukraine, Türkiye’s Parliament approved Sweden’s bid to join

NATO. According to international news wire Reuters, President Tayyip Erdoğan is expected to sign it into law in the coming days.

That leaves Hungary as the only holdout, despite repeatedly saying it would not be the last to ratify. As

recently as

Dec. 12,

2023, Reuters quoted Swedish Foreign Minister Tobias Billström as saying Hungary had repeated that promise at a meeting with his Hungarian counterpart earlier in the week.

On Jan. 18, Gergely Gulyás, the Minister of the Prime Minister’s Office, suggested NATO accession was “not a priority” for Sweden. According to Reuters, Gyulás, speaking at his regular Thursday press briefing, said Sweden’s foreign minister or prime minister should “get in touch and ask what concerns the Hungarian parliament has” about Sweden’s NATO accession.

There does, however, seem to have been some movement. On Jan. 23, the PM’s press chief, Bertalan Havasi, announced that Orbán had invited Swedish counterpart, Ulf Kristersson, to Hungary to address Sweden’s NATO accession, according to state news agency MTI. The sides would also discuss strengthening bilateral ties and deepening mutual trust, Havasi said.

According to the international news wire Associated Press, Billström declined to say whether Kristersson would accept Orbán’s invitation.

“We must first think through what the letter signals,” the foreign minister said. “What we hope is, of course, that Hungary will ratify the membership as soon as possible.”

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Budapest Business Journal | January 26 – February 8, 2024

Employees Focusing More on Work-Life Balance in 2024

As in most cases, the report contained good news and bad. Until December, both business and household expectations had improved, but one month later, the business side became pessimistic, albeit “within the statistical margin of error.”

In the first month of this year, only industry saw a noticeable negative change (a two-point drop), while in the other three sectors, the outlook for companies was virtually unchanged compared to December, GKI said.

As for employment outlooks, these became “more cautious” in the construction sector, while the service sector remained unchanged compared to December. Consumer confidence is nothing short of booming, reaching a near-two-year high in January.

“Households assessed both their financial situation in the last

12

months

and their financial prospects for the next 12 months as strongly improving,” GKI indicates.

Overall, expectations about the prospects of the Hungarian economy improved a lot in January, reaching an almost two-year high. However, pessimists still outnumber optimists by a large margin, according to GKI.

Brighter Picture

Another survey from staffing company Manpower shows a somewhat brighter picture: about 31% of Hungarian companies plan

A regular look at human resource issues in Hungar y and the region

Trenkwalder Mobility Index 2023

In the last quarter of 2023, inflation in Hungary was shrinking steadily, and economic sentiment started to take off. As measured by the economic research institute GKI, the index showed modest growth in November, then started registering recent records: December saw a ninemonth high, and January returned the best data in 18 months.

BALÁZS BARABÁS

HR Matters

National average: 46%

to hire in Q1 2024, while 21% intend to reduce their headcount, according to 525 employer respondents.

A similar trend was measured in the Randstad HR Trends 2024 report.

This year, 30% of companies plan to increase headcount, 17% will not add people or replace those who leave, and a majority of 46% plan to maintain existing levels. For those looking to hire, the main reasons given are market and company growth, as well as the need for new skills in the organization.

The Randstad report also looked into the expected business challenges

in

2024.

These were mainly related to inflation and wages, while, for instance, high energy costs were ranked only sixth. The need for specialized skills remains in focus, with the most sought-after being IT/technology, engineering, accounting/finance, production, back office/administrative support, sales, operations, logistics, and customer service.

But for employers, the lack of specific skills in the labor market is not the main obstacle in hiring. Other factors include: • unrealistic salary expectations: 88% • no or limited industry working experience: 55% • inadequate language skills: 37% • work life balance expectations: 31% • lack of required years of working experience: 28% • lack of relevant qualifications: 26% As for reasons for existing staff to leave, most of these are also related to salaries and work-life balance: • a better offer from elsewhere: 86%

• more opportunities elsewhere for career improvement: 49% • looking to pursue a different career path: 28% • workload too heavy: 26% • desiring a more flexible work schedule: 25% • no work-life balance: 21%

Lacking Mobility

One aspect not reflected in the Randstad HR Trends report is an openness to relocate or, put another way, labor force mobility. Staffing and HR firm Trenkwalder has done its own work to reveal the trends in this area. Its finding is that 46% of current employees are willing to relocate from their current location, and not only within Hungary but also abroad.

While this percentage seems high, it is worth noting that it is lower than last year, when it stood at 53%. Interestingly, it is not the least developed Hungarian counties that lead the openness to mobility, but those in the southwestern region, Baranya and Somogy. Most respondents, 89%, gave as a reason better living conditions and a more stable future (53%), but also more job opportunities (43%). Almost one-third, 31% of employees, plan to relocate within two years from now.

Regarding the available jobs, the respondents were not too optimistic.

A little more than half,

51% to be

precise, consider there are not enough job opportunities in their area, a significant rise compared to the 34% one year before.

Regarding the specific wage levels, regional differences remained “significant” in Q3 2023, the Central

Statistical Office (KSH) said in a review of labor market data. The average wage in Budapest stood at a gross of HUF 677,000 per month, 68% higher than that in Szabolcs-Szatmár-Bereg County. Here, wages were the lowest in Hungary, at HUF 402,000 per month on average.

Compared to the second-ranked Győr-Moson-Sopron County, home to Audi, among other employers, where the average salary was HUF 589,000 per month, employees in Budapest earned 15% more. The average wage in the capital city was 21% over the national average in the third quarter.

Top Employers in Hungary Labor force portal munkahelyeink.hu [Workplaces] compiled the list of the best employers based on the opinions of former and current employees.

The participants voted not only on the salary level but also on work-life balance and company culture and values. The list is as follows: 1. Yettel Hungary 2. Pepco Hungary 3. Harman Hungary 4. Metro Hungary 5. Coca-Cola HBC Hungary 6. Penny 7. DM Hungary 8. Jysk Hungary 9. Erste Bank 10. Audi Hungaria

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Budapest Business Journal | January 26 – February 8, 2024

Business

CEE Markets Expected to Perform Strongly This Year OTP Bank experts continue to recommend an underweight in stocks while maintaining some exposure to gold in their investment strategy.

Despite the expected continuation of inflation decline, they believe the market has overshot in pricing-in interest rate cuts. As a result, Hungary’s biggest bank anticipates fewer rate reductions in advanced and domestic bond markets than what is currently priced in, making long-duration bonds unattractive at present yield levels.

GERGELY HERPAI

At a press conference on Jan. 19, OTP experts explained that they foresee the most substantial profit growth in emerging stock markets this year. For the Hungarian forint, a fundamentally stable exchange rate is expected in the first half of the year, although depreciation risks are also perceptible.

To achieve the analyst consensus for this year, including ongoing disinflation, rate cuts, and a soft landing for the economy, monetary policy steps must be perfectly timed.

This is particularly crucial for the Federal Reserve (Fed), as starting to ease too late could risk a recession, while doing so too early could undermine the fight against inflation, according to the latest investment strategy from the OTP Analysis Center and OTP Global Markets experts.

A Stable Forint?

Its analysts predict a fundamentally stable exchange rate for the forint in the first half of the year but also see factors that could lead to depreciation risks in the second half, including the potential realization of external risks, decreasing interest rate differentials, government programs aimed at stimulating economic growth and intensifying tensions with the EU. The central bank might accelerate the pace of interest rate cuts early in 2024 due to the rapid decline in inflation.

Given the high real interest rates and weak domestic demand, a more From left, Tamás Bozsogi, Head of OTP Private Banking, Gergely significant step than the previous 75-100 Tardos, head of OTP Analysis Center, Dávid Sándor, head of the bp base rate cuts could be conceivable.

Multi Asset Analysis Department at OTP Global Markets.

However, considering the importance of the forint’s stability, the most likely scenario for Q1 is a return to the 100 basis potentially contributing to the region point steps seen last summer. By the end While the investor and analyst outperforming this year, OTP says. of the year, OTP believes the benchmark community generally anticipates a soft Regarding sectoral allocation, the interest rate could favorably decrease landing for the economy, OTP Bank’s to analysts have chosen investment experts say they also identify downward opportunities spanning cycles. For and upward risks. Therefore, their instance, the healthcare sector promises investment strategy is designed to which makes the market’s priced-in significant profit growth this year, offer protection in either a recessionary 4.25-4.5% value appear overly optimistic. environment or continued strong growth benefiting from its defensive nature and Based on this, it does not find longadvancements in artificial intelligence. with renewed inflation risks. duration bonds attractive for the forint This involves recommending portfolios In the event of stronger-than-expected at the current levels around 5.5%. economic growth, the cyclicality of the with a lower allocation to stocks and Overall, following the quick recovery industrial sector can be well exploited, a higher allocation to bonds (favoring in rate cut expectations and significant aided by deglobalization trends, lower shorter over longer maturities) alongside falls in bond yields, long-duration investment expenditures in recent some gold exposure. This allocation bonds have lost their appeal. In the years, and fiscal side supports. is protective against a recessionary bond sector, it is advisable to search While the U.S. economy continues outcome while considering that stocks, for shorter-term securities. to hold up surprisingly well despite at current levels, are relatively more For Hungarian retail investors, special the inflation shock and rapid monetary expensive compared to bonds. retail bonds remain the most attractive tightening, the Eurozone has been The bank says the strategy responds virtually stagnant since the fourth quarter option for forint investments. Regional to a potential scenario where economies of government bonds offer sufficiently do not slip into recession (possibly due attractive yields with manageable risks to new fiscal stimuli), but disinflation for diversification in euros and dollars. slows or temporarily stalls. Accordingly, Instead of the anticipated rebound due This also applies to euro or dollar bonds they have underweighted the U.S. stock to lower energy bills, European growth issued by regional companies, which market, which typically yields lower weakened further last year, likely pay higher yields than their European returns in election years. Within it, entering a mild technical recession or American counterparts. Both they have shifted towards cyclically from the third quarter. instruments are additionally suitable exposed, smaller-cap segments that “In 2024, the tables are expected to for partially hedging the risks of have underperformed. turn, with the U.S. slowing down and a potential weakening of the forint.

European Over-weighting the European economy potentially “Gold continues to play a role as a hedge Though the European market, which is picking up, but growth in both major in balanced portfolios,” insists Dávid significantly cheaper and benefits from economies may remain historically low, Sándor, head of the Multi Asset Analysis stabilization in the manufacturing sector, with particularly strong negative risks Department at OTP Global Markets. may profit more, the experts prefer to in the U.S.,” pointed out Gergely Tardos, Gold had an outstanding year last year, establish over-weighting within this head of the OTP Analysis Center. appreciating more than 13%, setting a new category through emerging markets and In Hungary, the overheating before all-time high in early December (above Central and Eastern European stocks. the elections, the energy crisis, USD 2,100/ounce) before undergoing a The most significant profit growth regionally high inflation, and monetary minor correction. Moreover, gold reacted this year is expected from emerging and fiscal tightening caused a recession positively to the Fed’s December indication markets, and the end of the U.S. in 2023. However, in 2024, growth is that three rate cuts could come in 2024, interest rate hike cycle, coupled expected to restart, driven by a less with a weaker dollar and lower real interest with the stall in the strengthening hostile external environment, rising real rates typically having a favorable impact of the dollar, could provide a wages, and consumption stimulated by on the price of the precious metal. tailwind. The CEE region remains decreasing interest rates. After a nearly the cheapest globally, disproving 1% recession characterizing the whole See also “2024: a Year of Global many fears last year, with the outcome of last year, GDP could expand at a rate Uncertainties; Equilor Advises Prudent of the 2023 Polish general elections above 2% this year, OTP believes.

Investment Strategy” on page 10.

5.5%,

2022.

8|2

Business

PRESENTED CONTENT

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2024

Record-breaking Hipa Ready to Go Again in Search of Added Value The Hungarian Investment Promotion Agency has been something of a “serial offender” when it comes to setting new foreign direct investment records year on year.

Still, even it will have its work cut out to maintain that form in 2024. Hipa pulled in a breathtaking EUR 13 billion in 2023, doubling the previous record, set only in 2022, of EUR 6.5 bln.

“We know that the extra profit taxes and certain extra taxes caused insecurities in some industries. But our ambition, generally, is to maintain the favorable business environment.

The key is to keep the low level of taxes, the 9% corporate tax and the 15% personal income tax. And, of course, our ambition is to phase out these extra profit taxes as soon as possible.”

ROBIN MARSHALL

If those figures are impressive enough, the global context makes them even more so: According to OECD figures updated in October 2023, global FDI flows in the first half of last year were 30% below those recorded in H1 2022, and 44% down in Q2 on Q1 (oecd.org/ investment/statistics.htm). The obvious question is: How did Hungary buck that trend so impressively?

“It was not easy to reach such an investment volume when you have less FDI searching for a location,” says István Joó, the CEO of Hipa.

“Altogether, we closed 209 projects in 2023. [….] This success is partly thanks to the Eastern Opening Policy of the Hungarian government, which was launched in 2012 to intensify economic cooperation with our Eastern partners, especially China, Korea, Japan, India and some other countries as well,” he says.

“Nearly 82% of the industrial volume of last year came from the East. And the biggest chunk of that is the Catl investment in Debrecen, amounting to EUR 7.3 bln,” Joó explains.

It has become commonplace for Hungarian ministers to laud Hungary’s role as a meeting ground for Eastern and Western investors, particularly in the electrification revolution gripping the automotive industry. Think of

Open for Business

The favorable business environment has been a crucial determinant in attracting FDI over the years. While sector-specific special taxes may have dented this a little, and international chambers of commerce have universally called for their removal, Joó insists Hungary is still very much open for business.

“We know that the extra profit taxes and certain extra taxes caused insecurities in some industries. But our ambition, generally, is to maintain the favorable business environment,” he outlines.

“The key is to keep the low level of taxes, the 9% corporate tax and the 15% personal income tax. And, of course, our ambition is to phase out these extra profit taxes as soon as possible.

On the other hand, pharmaceutical companies can offset extra profit tax up to 50% by the amount of their investments. So, the more they invest, the less tax is due,” he adds.

“2022 and 2023 were exceptionally bad years for the world economy, and the government’s objective was to keep inflation under control. But for 2024, we have a much better outlook with significant GDP growth.

István Joó, CEO of Hipa China’s EVE Power, which is building a battery plant right next door to the BMW iFactory under construction in Debrecen, or the aforementioned Catl, which will supply Mercedes in Kecskemét.

“We have profited a lot from this Eastern-Western cooperation, and Western companies are knocking on the door of Hipa to bring their suppliers from China here to Hungary,” Joó says.

No Discrimination

But he is quick to point out that there is no “discrimination” between partners.

Hungary may have opened its arms to the East, but it has not turned its back on its long-term investors from the West.

If we analyze the share of reinvestments in the total volume, it is reassuring that both Eastern and Western companies are deciding to reinvest in the country. The Hungarian business environment is still the most competitive in Central Europe,” Joó says.

Electronics and automotive were again the dominant sectors in terms of attracting investment. The former alone represented EUR 9.3 bln in investment volume; the 30 automotive projects represent a combined EUR 1.7 bln.

After that, however, the portfolio is quite broad-reaching across industries and services.

“I’d mention pharma and the food industry, and also the business services and shared services centers, because they are also well represented in our pipeline,” Joó notes.

“Just to give you an example, Germany provided the most projects last year: 18. They were responsible for every fourth FDI deal,” Joó notes.

The United States was another strong contributor, with eight projects.

The two countries combined accounted for nearly 3,500 jobs or close to 20% of all new positions announced in 2023.

While China accounted for nearly twothirds of the total investment volume, Hungarian companies invested the fifth Workforce Doubled largest amount.

Indeed, in the last five years, the number “One of our missions is to help Hungarian companies to grow. Hopefully, of people employed in business service centers has doubled, the CEO says, to this position will be better and better in 100,000. Notably, many BSCs are opting the coming years,” Joó says.

2

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Budapest Business Journal | January 26 – February 8, 2024

Top FDI Locations by County in 2023 County

Projects

Pest

15

Budapest

10

Hajdú-Bihar

8

Győr-Moson-Sopron

7

Borsod-Abaúj-Zemplén

6 Source: Hipa

for Hungary’s secondary cities away from the capital, with good schools and well-qualified potential workforces.

“By now, 25% of the workplaces established in the countryside are in the BSC sector, in university cities such as Debrecen, Szeged, Székesfehérvár, and many others. We inspire the business service centers to choose these countryside locations because the talent pool is significant. [….] And it is the goal of the Hungarian government to keep the talented people in the countryside,” Joó explains. More on this later.

Joó says the investment agency is not evangelical about any particular business.

“We welcome investments in all sectors if they bring high-end value to the country, with good salaries, modern technologies, industry 4.0 solutions, and so on.”

Research and development is another area where the government has courted investment. Last year saw a “significant” milestone in that regard.

“Samsung SDI launched a huge R&D project in cooperation with some universities in Hungary, the largest yet in Hipa’s history. It’s important to mention because the government is heavily criticized by the opposition that we bring here only assembly factories, which is not true, of course,” Joó insists.

Geographic Spread

Where those investments go in the country also matters. Hungary has long been unusually Budapest-centric, and one of Hipa’s tasks is to encourage FDI toward what Hungarians call the vidéki, the “countryside.” Altogether, nearly 87% of 2023 projects were linked to a countryside location. This also makes good sense from a labor perspective, given that Hungary enjoys near total employment, though this is not equally true in all regions.

“In the last decade, we have concentrated on the east country, and we still have much to do in some smaller

cities in northern Hungary. [….] Now, to balance industrialization, we have to shift towards the south,” Joó says.

Counties such as Békés, Baranya, Tolna, and Somogy have higher unemployment than the national average.

The aim is to direct new investors to those regions of the country via higher subsidies to boost industrialization.

And that policy has already borne fruit.

“BYD chose Szeged [for its EV production plant] just before Christmas, and CPMC, for example, chose Makó, which is close by [for its aluminum beverage can factory]. So, we have some results already in the southern part of the country, but we still have a lot to do in those regions. That’s why the government decided to designate 600 hectares as an industrial park in the vicinity of Pécs.”

This year takes on a special flavor for Hipa as it celebrates its 10th anniversary. Between Jan. 1, 2014, and Dec. 31, 2023, some 2,123 Hipaguided projects were announced worth a combined EUR 49 bln that created more than 150,000 new jobs. What lies ahead? The step up from the 2022 record investment total to that of 2023 was steep. The EUR 14 bln question is whether Hipa can break it again in 2024.

“It’s a challenge, of course, for us to keep this level of inflow of FDI. And I think it’s too early to predict what will happen in 2024. But our goal is to attract investments that create higher added value for the country. We don’t know yet whether it’s possible to exceed the EUR 13 bln in investment. Of course, our objective will be to reach a record year again; we will see,” Joó promises.

“We have the financial means to continue our reimbursement promotion-related

Business | 9

Top Investor Nations in Hungary, 2023 Rank

Country

1

China

2

South Korea

3

Germany

4

United States

5

Hungary

6

United Kingdom

7

Denmark

8

France

9

Japan Source: Hipa

activities. This is important to highlight because we have experienced economic difficulties throughout Europe and in Hungary. But for the government, attracting new investors and new investments into the country remains a priority. All the financial means are available, not just for state subsidies but for infrastructure developments, as well.”

New for 2024 To qualify for regional investment aid, the eligible investment requires rises to EUR 110 mln from EUR 100 mln, but the maximum aid intensities have also changed for large enterprises: A maximum regional aid intensity of 60% or EUR 49.5 mln will apply to Baranya, Borsod-Abaúj-Zemplén and Heves counties; A maximum regional aid intensity of 50% (EUR 41.25 mln) will be applicable in Bács-Kiskun, Békés, Csongrád-Csanád, Somogy, Tolna, Hajdú-Bihar, Jász-Nagykun-Szolnok, Szabolcs-Szatmár-Bereg, Nógrád and Pest counties; A maximum regional aid intensity of 30% (EUR 24.75 mln) will be applicable in Fejér, Komárom-Esztergom, Veszprém, Zala, Vas and Győr-Moson-Sopron counties.

R&D: The maximum aid amount has increased from EUR 15 mln to EUR 25 mln; an aid intensity of up to 50% may be available, depending on the type of research

Eligibility criteria for creating high value-added jobs: reduced from 50 to 25 new workplaces for SSC investments.

Training: The maximum aid has been increased to the HUF equivalent of EUR 3 mln.

A new aid scheme for domestic companies with foreign subsidiaries aims to assist in repatriating their profits.

Profit-based VIP cash subsidy: to mitigate the effects of introducing the global minimum tax in the business environment.

Source: Hipa

10 | 2

Business

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2024

2024: a Year of Global Uncertainties; Equilor Advises Prudent Investment Strategy According to the annual outlook analysis by Equilor, 2024 could be marked by uncertainty due to ongoing geopolitical tensions and elections affecting billions of people worldwide. While domestic inflation in Hungary has significantly decreased, the National Bank of Hungary (MNB) may accelerate the pace of interest rate cuts, considering the still substantial real interest rates achievable.

GERGELY HERPAI

A crucial topic in Hungary’s economic sphere this year will be the growth rate, as the government prioritizes stimulating investments and invigorating growth. Equilor Investment Ltd. forecasts that the Hungarian economy will recover from recession in 2024, with GDP potentially expanding by 3.2%. Meanwhile, the Hungarian forint may slightly weaken compared to current levels, hovering around 395 HUF to the Euro by year-end.

The global economy faces numerous uncertainties in 2024: more than four billion people will go to the polls this year, with the May EU and November U.S. elections being of particular global significance. Within the EU, essential questions are whether the changes will further slow integration or make decision-making processes even more cumbersome.

Among the expected consequences, a reduced emphasis on green issues, a likely decrease in support for joint

Keeping Powder Dry

Due to the uncertainties of 2024, Equilor’s analysis suggests that investors should “keep some powder dry,” i.e., keep a part of their savings in relatively high-interest money market instruments, prepared for a potential stock market correction.

For Hungarian household savings, several series of Premium Hungarian Government Bonds (PMÁP) will pay significant interest in the first quarter, so it’s advisable to consider now where to invest these amounts.

The currently available

9.9% interest

PMÁP is extremely attractive in light of decreasing inflation, though other options, including stock market investments, may become more appealing.

The U.S. stock markets currently appear more expensive than their From left, Dániel Kovács, Bálint Szécsényi, and Zoltán Árokszállási. European counterparts, according to Equilor’s analysis. Significant revaluation has occurred in the markets since late October last year, following “While we’re optimistic about economic assistance within the EU, the expectations of interest rate cuts, Hungary, the overall economic and a halt in further budget expansion leading to a considerable increase in the prospects across Europe don’t seem are notable possibilities, the banking valuation of U.S. stocks, surpassing even particularly bright at the moment,” and investment specialist firm says. the German or Hungarian indices.

Current insights suggest a likely rerun Árokszállási added. of the However, the lead analyst noted that the realization of manufacturing investments started in recent years, “While we’re optimistic U.S. election between the present and and an accelerated flow of EU funds to previous presidents, Democrat Joe Biden Hungary could mitigate this. Last year’s about Hungary, the overall nearly and Republican Donald Trump, with economic prospects Trump currently slightly ahead. If the Republicans win, a further escalation in across Europe don’t GDP proportional budget deficit doesn’t deglobalization, tax cuts, more stringent seem particularly bright offer much scope for stimulating the immigration controls, and a rollback in economy, but noticeable growth can be decisions prioritizing climate protection at the moment.” achieved without intervention, and the and sustainability can be expected. funds allocated for utility cost reduction Moreover, the new president might may be less than last year. exert increased pressure on the Federal The deficit should reduce almost Currently, Hungarian stocks are Reserve for interest rate reductions, automatically from last year, with Equilor showing strength, with several blue potentially leading to inflation expecting it to be around 4.7%. As a chips exhibiting strong narratives. For growth. Besides political uncertainties, example, OTP Bank could have had geopolitical tensions (Taiwan vs. China), result, achieving more than 3% real GDP growth this year seems feasible. Inflation an exceptional return on equity last armed conflicts (the Middle East), and had decreased to 5.5% by December, a year, while the rejuvenating Hungarian wars (Russia-Ukraine) contribute to significant drop from the 17.6% annual economy and well-performing foreign uncertainties in global money markets. average in 2023, allowing the MNB subsidiaries could continue to bring At the same time, year-end 2023 saw to further cut interest rates, possibly substantial profits for what is Hungary’s stock indices rise primarily due to at a faster rate. highest traded stock. global interest rate cut expectations.

According to Árokszállási, a key The banking sector in Central Hungarian Growth question is how long the interest rate cut and Eastern Europe also appears Zoltán Árokszállási, the lead analyst cycle can last, as the current base rate intriguing, with banks in the region at Equilor, shared insights into the of 10.75% is far from Equilor’s expected potentially benefiting from an expected economic trajectory for Hungary in 2024. average inflation of 5.3% for 2024. economic growth that will be more “After the downturn we experienced The analysis indicates that long-term robust than this and next year’s last year, there’s a strong potential for inflationary processes remain uncertain; Eurozone outlook. In the south, Greek the Hungarian economy to demonstrate Equilor forecasts a 6% base interest banks still seem undervalued, with substantial growth,” Árokszállási rate by year-end. promising growth opportunities. commented. “This growth is likely to be The Hungarian forint is subject to Among the four traditional blue underpinned by an increase in internal opposing forces: Hungary now has chips on the Hungarian market, demand, which should be bolstered by access to a portion of EU funds, and Magyar Telekom displayed the most the rising real wages, even in the face of the interest rate differential compared remarkable performance in recent persistently low consumer confidence.” to global rates remains significantly in months. The company is implementing He also pointed out the role of favor of the forint. This could decrease a 15% rate increase in 2024, signaling lower interest rates in stimulating rapidly, so while some short-term strong pricing power, which might loan uptake but cautioned that strengthening is not ruled out, the have contributed to the recent state investments might not see Euro exchange rate could be around rise in its stock price, in addition significant growth this year.

395 HUF by the end of the year. to a significant revaluation last year.

2020

6%

3

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2024

Special Report Back to the Office

The Budapest Business Journal quizzed consulting professionals across Budapest to highlight trends regarding employees’ return to the workplace, hybrid work schedules, what young workers are looking for in a company and its management, the possibility of a fourday workweek in Hungary, and the future of offices.

LUCA ALBERT

“The employer that allows hybrid work with flexible time schedules and home office options for its employees enjoys an advantage in the labor market, both in terms of retaining the workforce and recruiting new employees. The possibility of a home office has become an important part of the employee ‘package,’” says Szilvia Fehérvári, a partner and attorney at Andersen Hungary.

Although the end of the COVID19 lockdowns saw a return to most of the pre-pandemic standards and expectations within the workplace, hybrid work schedules remain one of the most significant long-lasting impacts.

Deloitte’s 2023 “Big Quit” research highlighted Hungarian public opinion on hybrid work, mentioning that the opportunity for it was an important factor in job satisfaction for 78% of respondents.

So much so, indeed, that “an increase in the number of mandatory

Photo by WD Stock Photos / Shutterstock.com

The Future of Hungary’s Occupational Landscape Besides more flexibility in terms of hybrid work, Deloitte also looked at other factors to find out what young employees are searching for in a modern career.

“Popular trends within [Generation Z], such as #ActYourWage, #RageApplying and #QuietQuitting, show that company managers urgently need to think about how to create a more supportive, positive work environment, primarily for GenZ, but ultimately for all employees,” shares Martin Csépai, director of Deloitte Hungary’s HR consulting.

Gen-Z Desires

office days would encourage nearly half of workers to change jobs.”

Furthermore, the research showed

that

40%

available locally, such as company breakfasts or massages,” Reguly adds.

Along with the concept of hybridity, the four-day workweek has been a thoroughly discussed concept in the last few years, with several trials being run in 2022 not only in Europe but globally; however, it seems it is slowly losing momentum with Hungarian companies.

of respondents would give up part of their salary for the possibility of choosing a more flexible place of work.

There is, however, a tension between Hungarian employers and employees as to the extent of flexibility a hybrid workplace should provide as managers look to persuade “Popular trends within more workers to return to the office.

[Generation Z], such “In 2023, the news has already surfaced as #ActYourWage, at some larger companies that, in contrast to unlimited home office, they will require #RageApplying and a certain proportion of time to be spent in #QuietQuitting, show that an office environment,” shares Zita Erős, company managers urgently director of HR at KPMG in Hungary. need to think about how “In this matter, employers must find a balance to ensure sustainable operations to create a more supportive, in the long term, taking into account both employee satisfaction and business aspects positive work environment, so as not to lose the recruitment, attraction primarily for Gen-Z, but and retention opportunities inherent ultimately for all employees.” in the highly competitive advantage of working from home,” she adds.

According to Márta Reguly, leader of Reguly describes the approach as PwC’s People & Organization consulting team, companies rely on both compulsion “an attractive option” but explains that “[workers] have relatively low and positive encouragement to increase confidence in how it can be implemented their employees’ time in the office. effectively on a day-to-day basis.”

Home Office Elimination?

She adds, “Many fear this would hinder “There are examples of both phenomena; the employee’s wage level and career however, a combination of the two is opportunities. [...] On the one hand, most typical. In many traditional (often [employers] see it as strengthening the Hungarian-owned) companies, it can employer brand and employee wellbe observed that the home office option being; on the other hand, they are worried has been eliminated or is provided about decreased productivity. In addition, only in special cases,” she explains. implementing the system is also a great “The most typical way to encourage challenge, given the numerous labor laws, attendance is through various work organization and cultural development social programs and extra benefits tasks which fall to the employer.”

Three main requirements of Gen-Z workers were detailed in the report, including the implementation of short, practical lessons and information regarding the work process, an environment where employees can take a day off with peace of mind, and functional knowledge for managers to better coach, and reach, this cohort of workers.

With the increase of remote positions and hybrid work schedules within companies, the future of physical offices is becoming a cause for discussion for Hungarian office developers.

Attila Pintér, senior manager of real estate transactions at PwC, highlights foreseeable trends in terms of hybrid work and its consequences on physical office spaces.

“Hybrid working will probably stay with us forever. Accordingly, the role of the office has changed significantly; solitary work requiring immersion and concentration takes place more in the home environment, and the office is more the primary place for teamwork, brainstorming, and socialization,” he states.

“Two opposite effects appear as a result of this: fewer people are present in the office at a given time, but on average, more space is needed per person due to the increased proportion of common areas.”

Pintér accepts that there is an apparent contradiction here. “The two effects, at least for now, it seems, do not balance each other out: the vacancy rate of office buildings [in Budapest] rose from

around

5%

in 2019 (which was more like 3% in the core submarkets) to more 13% by the end of 2023,” he says.

“In the long term, ESG aspects will become determinative, so it is expected that the office market will be segmented; we anticipate a much larger price difference than the current one between newer offices, with appropriate qualifications, and older, less energy-efficient buildings that do not meet the most modern expectations,” Pintér concludes.

12 | 3

Special Report

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2024

Hybrid Work Model Looks Here to Stay, but at What Ratio?

A hybrid work model, whereby employees use a combination of in-office and remote days, is increasingly becoming the norm in modern office complexes, writes real estate editor Gary J. Morrell.

The office has traditionally been central to work activity, but home office has become increasingly common since the pandemic and in the post-Covid environment. Indeed, flexibility/hybrid work stands in the top three priorities when considering a job, according to iO Partners Hungary. Further, 98% of business services centers in the CEE region have adopted remote work practices, consultancy CBRE says.

“While there is a push from big businesses to return to the office, will pay off in the form of happy, workplace experts believe that most organizations will adopt a mostly flexible engaged employees, Vlková argues.

“Office occupancy levels have been approach in the future. The concept of slow to pick up after the pandemic, spending five days a week in the office averaging only around 35% according is becoming outdated, as companies to recent surveys. Perhaps this is why recognize the value of remote work some employers, especially international and the benefits it brings,” says HRD companies, are taking a more intense Connect, a product consent provider approach to in-office presence, in which for HR organizations.

Even so, a growing number of firms have they have often invested heavily in recent years and thus adapted their office spaces begun to demand that more workers show to the latest trends,” she points out. up in the office. As a result, the hybrid model that took hold after the pandemic Turning Point? has chiefly settled into a 3:2 ratio: three days in the office and two days from home. “This year will be a turning point in this respect. It will show whether the hybrid However, some employers are model has really taken root in our country considering a total return to the to the extent that there is no going back corporate office. To avoid losing employees, who increasingly prefer home to the traditional setup,” Vlková says.

Aurelia Luca, executive vice president office-enabled work, they will need to of operations for Hungary and Romania address both the attractiveness of their at Skanska, agrees that the situation offices and their relationships with their is changing. people, research among “Based on a comprehensive survey that we conducted across four CEE countries, companies we are witnessing an evolving hybrid in the EMEA region by Colliers concludes. working model,” she says. The Skanska “In today’s offices, 30-40% of the space study revealed a preference for officeis allocated to individual workstations based work, with over half of respondents and 60-70% to team collaboration and predominantly working from the office. relaxation. This is a mirror reversal of In Hungary, 27% of employees preferred the pre-pandemic situation,” says Jana to work only one or two days in the office Vlková, director of Workplace Advisory and the rest from home. But limited and Office Agency at Colliers. days in the corporate HQ can also have “Smaller meeting rooms for two to a significant negative impact according six people are important, which also to employees in all countries. Top of the serve to support virtual meetings. list is the integration of new employees at Companies can also easily adapt their spaces with mobile phone booths and meeting modules for up to six people Other areas of concern include social in a previously densely occupied and professional relationships between open space,” she says. Data suggests employees (41%), and teamwork, that the investment in transformation

300

44%.

Phase one of H2Offices by Skanska, in the Váci út Office Corridor. involvement in after-hours company activities, and recruitment of new employees (all 37%).

Employees prefer to work in a hybrid model and often expect flexibility in working hours and the ability to choose when and where they work. When they do come in, they need an environment that fosters teamwork and collaboration, both physically and virtually, says Csaba Zeley, managing director of developer ConvergenCE. “Most companies that apply the hybrid model have two to three days in the office: teams can generally choose specific days each week, with the remaining days spent working remotely,” he explains.

“Mondays and Fridays are definitely the least popular days for these teams, but this can vary widely and is often determined by organizational policies and the nature of the work. Many of our tenants come to the office every day, but our offices are in prime locations and therefore may not be representative for the whole capital,” Zeley adds.

The 3:2 Ratio

Máté Galambos, leasing manager for the Belgium-based multinational developer Atenor, says the most common setup is the 3:2 approach in his firm’s experience.

“Most of the leases that we have signed in the past years supported this way of working through the layout of the office, the number of workstations and, therefore, the average size of the office leases started to shrink,” he says.

The hybrid work trend could create tension between employee preference for remote work and employer insistence

on an in-office presence. Factors such as collaboration, productivity, worklife balance and employee satisfaction should be setting a guide, in the view of analysts.

“It is certainly extremely hard to attract employees back to the office, especially if they were granted a

100% WFH

[work from home] policy earlier. Many employees seek fully remote positions, which is why it is crucial for employers to provide inspiring and homelike office spaces,” comments Galambos.

“We have some tenant feedback claiming that upgrading to a gorgeous new office helped them lure back some of their staff, and many people end up staying for more days than required by management,” he says.

Convergence’s Zeley says company executives worry about effective communication, information flow, and the potential for miscommunication in a remotely working workforce.

“Some employers may worry about maintaining productivity levels, monitoring work, and ensuring accountability when employees work remotely. Many employees appreciate the flexibility of remote work and argue that they can be just as, if not more, productive outside the traditional office. Successful implementation of remote or hybrid work often involves clear communication, establishing policies that address concerns, and creating a supportive work culture that fosters trust and flexibility,” Zeley concludes.

3

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Budapest Business Journal | January 26 – February 8, 2024

Special Report | 13

Worker Requirements Becoming More Sophisticated The office environment, its amenities and location are an intrinsic part of any project concept, design, and leasing strategy.

This is in reaction to changing and ever more complex tenant and, in turn, staff demands.

Sustainability accreditation from third-party organizations such as Breeam, Leed and Well have a range of requirements that are increasingly the norm for high-end developments and a basic expectation for tenants and staff.

GARY J. MORRELL

The design, development and property management of offices in line with sustainability regulations while also responding to tenant and staff demands. This increasingly includes the internal atmosphere and its effect on the health and well-being of workers. That, in turn, can influence staff retention in what remains a tight labor market and generate opportunities for increased productivity.

“In a rapidly changing world, people crave pleasant places; they expect the work environment to be almost as cozy as their personal environment in the home office. Casual meeting spaces, work cafés, and couches in the office are very popular instead of rigid meeting rooms or lines of open office workstations,” says Regina Kurucz, a sustainability consultant and Well assessor.

According to job satisfaction surveys, their work environment plays a significant role for more than half of all employees. Employers should, therefore, adapt to new trends in creating attractive office spaces. Not only is an emphasis on focused and creative work important, but also on an environment that encourages collaboration and team meetings, says consultancy Colliers.

“Employers who choose to return to full in-office work structures will need to be able to offer something extra.

Artist’s rendering of an office interior at Atenor’s BakerStreet prpoject, which has Breeam “Excellent” accreditation.

For example, in addition to an attractive working environment, they can also offer high-quality technological and ergonomic facilities, which in most cases they cannot provide for employees who work from home,” says Jana Vlková, director of workplace advisory and office agency at Colliers in the Czech Republic.

“In addition, a strong company culture will help to create a sense of belonging between the employee and the company. However, this is equally important for companies that maintain a hybrid working model,” she adds. Leading developers also share these sentiments.

Flexibility is Crucial

“Today’s workforce and tenants demand office spaces that offer flexibility of individual and collaborative working areas: in both terms, data suggests that the investment in transformation will pay off in the form of happy, engaged employees,” says Aurelia Luca, executive vice president of operations for Hungary and Romania at Skanska.

“Additionally, amenities such as relaxation or fitness zones, healthy food options, and comprehensive cycling facilities, including showers, are becoming essential. Enhancing these offerings with features like a rooftop running track and green terraces, similar to those found at [our development] H2Offices, further elevate the workspace, offering unique and engaging experiences for tenants,” she adds.

Well-assessor Kurucz points out that developers are paying more attention to community spaces within projects.

“The Well Building Standard recommends a space that is a minimum of 186 sqm, provides quality seating and is easily navigable for individuals of all abilities. For example,

the Well pre-certified and Access4you certified Academia Offices [in Pest’s District V] have a beautiful lobby as a community space, with plenty of natural light and biophilia. The lobby and the café are open to the public during office hours,” she notes.

“Amenities such as relaxation or fitness zones, healthy food options, and comprehensive cycling facilities, including showers, are becoming essential. Enhancing these offerings with features like a rooftop running track and green terraces […] further elevate the workspace, offering unique and engaging experiences for tenants.”

Restaurants and cafés are still the most sought-after services in-house, along with accessibility to green spaces such as an internal garden or green rooftop, gyms, flexible/rentable meeting rooms or conference rooms, bicycle and e-bike storage, electric car charging stations, highspeed internet and advanced technology infrastructure according to Csaba Zeley, managing director of ConvergenCE, the developer of the abovementioned Academia Offices, in partnership with Europa Capital.

Trust and Blackmail

Ottó Feuertag, owner of Europa Design and co-founder of the Well-being Association, believes that hybrid working practices will settle at 40% home office and 60% at the corporate office; we will never again see 100% of staff back in the company HQ.

“The working model mainly depends on the trust level and corporate culture. In Hungary, employees are more demanding and ‘blackmail’ the employers as to why they will not return to the office, or under what conditions,” he argues.

“This results in an unpredictable flow of workers to the office during the week, resulting in peeks on Tuesday, Wednesday and Thursday, and a very low utilization of office space on Mondays and Fridays. This is a massive waste of resources. I think the hybrid work mode needs more support from the HR and FM [facility management] side; therefore, I see a huge market for proptech in this task. The other challenge is to retain a quality workforce, and the well-being strategy is there to help,” Feuertag adds.

It is a point Kurucz is happy to echo.

“We see an increasing demand for a variety of healthy food options.

You are what you eat! Therefore, people require more information on the food they consume. Also, the number of people on a special diet, whether due to food intolerance or weight loss goals, is also increasing,” she points out.

“Our buildings, the places and spaces where we spend the vast majority of our time, hold the key to protecting our families, businesses and the wider public. A wealth of rigorous research highlights the profound role buildings play in promoting human health, preventing disease and supporting well-being,” Kurucz says.

“Several key factors within buildings (including indoor air quality, water quality, thermal comfort, acoustics, lighting, materials, and access to physical activity and healthy foods) have a direct influence on shaping positive health outcomes. According to a large and growing body of research, by adopting healthy building practices, we can drive numerous health, economic and societal benefits,” she concludes.

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Budapest Business Journal | January 26 – February 8, 2024

Developers Must Meet Demands of Tenants’ Staff The recently completed 12,500 sqm Academia office redevelopment and renovation project

by ConvergenCE and Europa Capital in Pest’ District V is expected to achieve its final Well “Platinum” and “Gold” accreditation this spring. Successful developers now need to meet staff demands along with the additional costs, says real estate editor Gary J. Morrell.

The Academia Office lobby is typical of the new generation of community spaces developers are creating for tenant staff and the public alike. It is open to visitors during office hours.

“Biophilic design is a key element as well, used not just for aesthetic purposes but also for improving air quality and bringing a sense of calm. These features not only make offices visually attractive but also ensure they are environmentally responsible and conducive to the wellbeing of their occupants,” Luca insists.

Building “attractive workspaces” has become a dominant mantra for high-end office developers, aware that their marker shifted markedly in the aftermath of COVID. “In our experience locally, as well as in our wider international portfolio, tenants are generally drawn to contemporary office designs with non-traditional layouts. As a result of past events, such as the emergence of new home office policies, we have witnessed the birth of a more collaborative working style,” says Máté Galambos, leasing director at Atenor, another leading Hungarian and CEE office developer.

meeting rooms, and communal spaces that facilitate teamwork and creativity, argues Csaba Zeley, managing director of ConvergenCE, responsible for the abovementioned Academia Offices.

He adds that offices are increasingly designed to be flexible, accommodating various work styles and tasks. Open floor plans with movable furniture and modular layouts allow easy reconfiguration to suit changing needs. Improved energy efficiency through technology, such as smart lighting, climate control, and integrated communication systems, will likely become more prevalent.

When it comes to sustainable design, green building practices such as refurbished or environmentally friendly materials are likely to be prioritized, alongside creating spaces that prioritize employee well-being, with features like natural light, indoor plants, and ergonomic furniture.

Upgrading and integrating advanced technologies, such as smart building systems, high-speed internet, and collaboration tools, may require significant upfront investments but are must-have features for future-proof buildings in the view of Zeley.

“Fitting out gyms can definitely be CapEx intensive, as well as investing in high-quality furniture that can support a flexible and adaptable workspace. It is crucial for developers to carefully assess the specific needs and expectations of their target tenants and workforce,” he suggests.

“Right from the beginning of the Academia Office building renovation, the focus was on the individual, the employee, and the visiting guest. Well, developed over 10 years and supported by the latest research, provides certifications to buildings and organizations that offer the best conditions for optimal performance, prioritizing physical and mental well-being,” says ConvergenCE, the developer in this case.

‘Homelike’ Ambiance Some might describe these types “Along with the new working style, it has of amenities as sophisticated, but become increasingly important to create sustainability consultant and Wellattractive workspaces that provide ample assessor Regina Kurucz takes opportunities to connect with colleagues a slightly different viewpoint. and business partners. Instead of fixed “Interestingly, the most modern offices workstations, interior designers often satisfy the most basic biological needs: propose activity-based working layouts they are bright, with fresh air, with with a more ‘homelike’ ambiance as far plenty of plants, clean drinking water, as appearances go,” he acknowledges. peasant acoustics and an environment A fundamental requirement is to have suitable for establishing meaningful some basic amenities in the immediate relationships,” she argues. surroundings of the office building, and Aurelia Luca, executive vice president ideally inside it. These include bicycle of operations for Hungary and Romania usage facilities and commercial food at Skanska, sees newly developed class Understanding the Trends and beverage units. Popular services “A” offices as having a more humaninclude cafés, restaurants, ATMs, parcel “While implementing these features centered and eco-conscious design can come with upfront costs, terminals, pharmacies and much more. in response to tenant demand. they may contribute to long-term “[Our] Váci Greens [project] laid the “These spaces use natural materials, tenant satisfaction, retention, and groundwork for the concept, as it was providing a warm and inviting feel. designed to be a large campus-style office increased demand for the developed Large windows ensure the proper ratio spaces. Additionally, understanding development with a plethora of services of natural light, creating a bright and market trends and staying ahead lively atmosphere. There are thoughtfully on the ground floor,” Galambos argues. of evolving workplace expectations Functionality is crucial when it comes placed and customized lighting changes can position developers as leaders to the look and feel of newly developed according to the surrounding light in providing innovative and soughtor renovated quality offices. There is conditions, and set differently within after office spaces,” Zeley adds. an emphasis on collaborative areas, the same space,” she explains.

Overall cost consequences could be significant, but in most cases, the financial burden of an ultra high-end fit-out is shared between the tenant and the developer, Galambos of Atenor points out.

For landlords with older, less energyefficient assets, it might be the case that the initial investment in getting their buildings up to par with more sustainable and modern office buildings is the most significant part of their overall budget, even before any fit-out work could commence.

However, in the case of new stock, the equation includes the cost of build-out according to current tenant requirements, he adds.

Skanska’s Luca says incorporating top-notch technologies and premium quality materials inevitably comes with an elevated price tag.

“However, such investments are natural for ‘A’-category office buildings, as these features are critical to meeting the high standards expected in such developments. I do believe that there is a higher cost in not meeting these expectations,” she warns.

“Overall, the office market will continue to be tenantdriven in 2024, with flexibility in contracts remaining of fundamental importance. We do not anticipate a significant turnaround in vacancy rates, particularly in lower-grade properties and locations outside central submarkets.”

Talk of the death of the office, which became common during and immediately after the pandemic, now seems as wide of the mark as the claim that history had ended when the Berlin Wall came down. Colliers argues that demand for prime locations and modern, green, energy-efficient, and ESGcompliant office buildings will remain stable, leading to higher vacancy rates in older office spaces.

“Additionally, there is a greater emphasis on employee needs in today’s business environment, prompting more companies to choose central, easily accessible locations with a wider range of services, rather than the outskirts or suburban areas,” the consultancy says.

“Overall, the office market will continue to be tenant-driven in 2024, with flexibility in contracts remaining of fundamental importance. We do not anticipate a significant turnaround in vacancy rates, particularly in lowergrade properties and locations outside central submarkets,” concludes Colliers.

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Budapest Business Journal | January 26 – February 8, 2024

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Higher-specified Office Projects the Order of the Day The Budapest office pipeline is low; developers are exercising caution, and new projects are being put on hold given the uncertain economic, geopolitical, and cost environment.

However, ongoing schemes are progressing, despite these issues and concerns over letting, office working practices and even how much time is spent in the office.

GARY J. MORRELL

BP’s new office in Budapest. Europa Design worked on the project.

Research Forum, which consists of CBRE, Colliers, Cushman & Wakefield, Eston International, iO Partners and Robertson Hungary. About 3.5 million sqm of this is speculative “A” and “B” class stock.

Cushman & Wakefield have traced nine projects of more than 5,000 sqm due to be delivered this year, with the largest at 34,000 sqm. It says the current vacancy rate stands at 13.5%.

“ESG-influenced work patterns will is one of the reasons our projects and navigate developers to refurbish existing landbank are located in easily accessible buildings rather than develop new ones. places, where one can travel by many This is how the carbon footprint can means of transportation, including be limited,” Pál insists. “We will need sustainable ones,” she adds. to find out how to work more efficiently Tamás Pál, business development and smartly using less resources and director at iO Partners, believes that more renewable energy. So, ‘less is future office developments must be part more’ should be applied more often of an existing business hub and not when developing a new building or separate standalone buildings. Instead, refurbishing and redeveloping an old offices will be developed alongside one. This will also push the recreation of additional functions, such as residential or hotel, adding extra value. Jana Vlková, buildings with new functions,” he adds. director of workplace advisory and office agency at Colliers in the Czech Republic, agrees with that assessment.

In response to market pressures Adapt to Succeed “The success of office spaces in and strengthening environmental remaining a prime development option regulations, developers are delivering will depend on the ability of developers more sustainable office developments. and investors to adapt to changing A growing trend is for offices to be part circumstances, understand tenant of mixed-use projects. That said, how Connection is King requirements, and offer innovative changing work practices will impact “We will see large office hubs being solutions that meet the evolving the office market remains to be seen. developed in the future as part of demands of the modern workplace,” “Since there is a clear demand for the location and complemented with concludes Csaba Zeley, managing further enhancement of office spaces in residential and retail/service amenities. director of ConvergenCE. Budapest, we are not experiencing as Despite the subdued pace of the market, No self-standing office properties drastic a reduction in space as in some without full connection with the location other CEE markets and Western European core locations with solid ESG features will be developed. The 20-minute city embedded and a high occupancy level markets,” comments Kata Mazsaroff, with good accessibility to amenities will continue to be a desirable investment managing director of Colliers Hungary. also be preferred in CEE,” she believes. choice, according to Aurelia Luca, “This post-pandemic work culture Sustainability consultant Zsombor Barta balances remote and in-office work while executive vice president of operations is another to back this trend. addressing workspace quality and flexibility. for Hungary and Romania at Skanska.

“We see more and more examples of “Its appeal is clear, presenting Accessibility, workspace experience newly developed office buildings where significant opportunities for investors and ESG requirements are at the forefront certain floors are developed for hotels looking for stable, long-term gains. of occupier demand,” she says. or residential flats. I think this new Our project pipeline is strong and Consultancy iO Partners has traced a mixed-type development provides more forward-looking with the next phases flexibility for developers and makes the of H2Offices and a new project called pipeline buildings more future-proof,” he argues.

Hold, a boutique office development in of office space for 2023-2026: 96,000 Another attractive option, not least from downtown Budapest,” she explains. sqm of this is already occupied, with a sustainability and circular economy “These plans are supported by 192,000 sqm still available. Planned point of view, is the renovation and significant interest from prospective developments with a minimum redevelopment of existing buildings. tenants. We are also open to identifying construction time of 24 months stand at The aim here is “to bring these buildings landbank opportunities, which play 562,000 sqm. The firm says the hybrid up to the level of the current requirements a crucial role in strengthening and model, splitting work between home both from a technical perspective and shaping our portfolio’s future direction,” and office, has become a permanent from a tenant experience point of view,” Luca says. As ever with real estate, element of the future of work; it expects comments iO’s Pál. little trumps location.

14-15% vacancy by 2025.

Some factors, like the scheme’s location “Prime locations are crucial for There is now around 4.3 million sqm and internal construction, can limit what companies to attract and retain talent, of quality office space in the Budapest is technically possible, but there is still acknowledging the importance of market, according to the Budapest much to commend this approach. convenience and accessibility. This

287,000 sqm

“The success of office spaces in remaining a prime development option will depend on the ability of developers and investors to adapt to changing circumstances, understand tenant requirements, and offer innovative solutions that meet the evolving demands of the modern workplace.”

While fashions may change over time, the right sort of office development will remain an attractive asset class, according to Máté Galambos, the leasing director at Atenor Hungary.

“As the global landscape of the commercial world keeps changing, investor appetites change with it, which is why industrial and logistics, retail and hospitality investments are becoming more popular in our region. Still, offices are reliably and continuously sought after; I am not worried about their future,” he concludes.

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Budapest Business Journal | January 26 – February 8, 2024

Outdated Administration Methods Among Most Frustrating Office Problems If you are an employer finding it hard to persuade staff back to the office, perhaps your HR administration is part of the problem. A recent survey has now quantified the problems that Hungarians most often encounter in their daily office work.

BENCE GAÁL

TOPdesk Hungary conducted a national, representative survey to determine what problems typically annoy Hungarian office workers the most. Rather than modern, fully digital solutions, many Hungarian companies still use paperbased or face-to-face solutions for their employees, although very few workers say they are currently satisfied with everyday administration and task management. The results show that approximately four-fifths of Hungarians are dissatisfied with day-to-day workplace administration, paperwork and other internal processes.

The most annoying factor, according to respondents, is that existing systems are too slow to provide answers to their questions: some 75% of respondents consider this to be one of the most frustrating factors in their job. In addition, nearly half of employees say that not being

Paperwork can be a major source of Hungarian office frustration. Photo by BongkarnGraphic / Shutterstock.com given enough information by management also makes their daily lives more difficult.

Printers are the most troublesome equipment for office workers, with more than a third putting them at the top of the list of problematic IT tools and services.

The second and third places in the survey went to installing new programs and disruptions to the mail system.

When confronted with a problem that interferes with their work, less than a quarter of those who completed the survey said they could remain calm. Most are quietly annoyed or vent their frustration by swearing. Around 10% of respondents deal with matters

by going outside for a few minutes or even smoking a cigarette; fortunately,

only

5%

of respondents said their method of coping is to give their desk a beating.

About 70% of respondents reported going directly to an IT professional or administrator when encountering a computer or other technology problem. Only four in 10 workers receive a reassuring response to their IT queries within 24 hours, but it is also true that only 14% of problem cases are delayed beyond three days.

Managing Internal Processes

The survey also looked at the channels employees use to manage internal processes. The results show that even today, paper-based or face-to-face administration is still as common as digital solutions. For example, a quarter of respondents make reservations for company premises and equipment such as meeting rooms, projectors and cars in person. New employees are still provided with a paper-based information pack in more than 25% of cases.

“The results of our survey highlight the typical problems with office IT and services that hundreds of companies and tens of thousands of employees face every day,” says Anita Zakrzewski, sales manager of the TOPdesk service management platform.

“What we see is that even in workplaces where most of the processes are done on computers, many times the administration is done on the phone or in person. With such informal methods, the larger the size of an organization, the more complex and the less efficient the problem-handling becomes. It is not surprising, therefore, that the vast majority of respondents are dissatisfied with the internal management of their company,” she notes.

Zakrzewski says that many business leaders are unaware that even a simple service management system can significantly streamline internal processes.

“The results of our survey show that just over

10% of

Hungarian office workers use some kind of digital task or service management system, which not only makes IT support more efficient but also increases employee satisfaction, as they experience less disruption and smoother problem-solving in their daily work,” Zakrzewski adds.

Volánbusz Promises a Hygenic Commute Back to the Office Increasing numbers of surveys show employers becoming less open to the idea of employees working from home. It stands to reason that if more workers return to the office, more people will use public transport to get to work. At this time of year, the numbers going to the doctor with flu-like symptoms are also steadily rising.

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Looking to reassure commuters, Volánbusz Zrt. has confirmed again that its buses are given a surface treatment developed

by Resysten in Hungary, which prevents pathogens from adhering to them. The coating is invisible, colorless, and odorless.

Volánbusz Zrt. has used Resysten’s surface treatment technology since 2015 on hundreds of vehicle interiors such as passenger seats, driver’s cabs, handles and interior glass surfaces. The profile of the coating was given a substantial boost during COVID.

In addition to hygiene procedures implemented in the capital during the pandemic, 176 vehicles, including 40 electric Mercedes-Benz eCitaro coaches used in the Budapest agglomeration and around 30 more buses used during the Ukrainian refugee crisis, also benefited from Resysten’s surface treatment.

In the fall of 2023, a further 200 Credo buses used to transport passengers throughout the country received the hygiene coating. The spread of epidemics in winter and spring and the transmission of diseases from one passenger to another can be reduced

significantly by surface treatment of the equipment, the coach company says.

Enhanced Hygiene

“As a responsible service provider and employer, Volánbusz is constantly keeping its facilities and vehicles clean and is open to new procedures to enhance its hygiene protocol,” comments Volánbusz Zrt.’s communication directorate.

“Resysten’s nanotechnology surface treatment process on bus surfaces provides continuous protection for up to one year, protecting the health of passengers and our company’s employees between cleanings,” it adds.

“As a testament to the success of our long-standing partnership with Volánbus, another fleet of vehicles has received the special surface treatment developed by Resysten this year. And we are particularly pleased that we can contribute to reducing the exposure of passengers to infections nationwide,” adds Péter Lehoczky, CEO of Resysten.

The spectrum of applications for Resysten’s durable hygiene coatings is broad; in addition to public transport, Hungarian hospitals, shopping centers, sports facilities, production halls, and the public areas of multinational companies have also been treated.

The technology has also been proven in numerous tests in other countries to prevent the formation of bacterial colonies in the long term and thus contribute to reducing hospital infections, including trials run by the National Health Service in England.

About Resysten Hungary Ltd. In 10 years, Resysten has grown from a family business to a global company. Its durable hygiene coating, which uses photo-oxidation to neutralize harmful substances, is effective for up to 12 months. The company says its coating can reduce the number of bacteria and microbes on any surface by up to 99.

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Ernie Kovacs, the Groundbreaking U.S. Comedian with Hungarian Parents

Born in the United States to Hungarian parents, Ernie Kovacs is perhaps the most influential comedian with roots in this country ever. But here, he’s all but unknown. Until I read the exceedingly handsome book “Ernie in Kovacsland”

by Josh Mills, Ben Model and Pat Thomas, and published by Fantagraphics, I had only a dim idea who he was.

DAVID HOLZER

Kovacs was born to Hungarian parents in Trenton, New Jersey, in 1919. His father, known to everyone as “Pop,” emigrated in 1906 from Tornaújfalu, today Turnianska Nová Ves in eastern Slovakia.

Kovacs grew up in a Hungarian immigrant community that, along with Pop and his Mom, Mary, he drew on for the characters he created. The most obviously Hungarian of these is the boozy lugubrious, and baffling cooking show host Miklos Molnar, surely an inspiration for the Swedish Chef on “The Muppet Show.”

Pop arrived in the States broke and became a beat cop in Trenton. After prohibition was made law in 1920, the gamekeeper turned poacher, so to speak, ran a saloon and then became a bootlegger. The family lived in a

20-room mansion

until their fortunes plummeted.

“Mary thought the sun rose and set on Ernie,” Mills told me over Zoom. “But she was a deeply eccentric character. When Ernie was a boy growing up in tough, urban Trenton, she bought him a pony.

Pop told Edie, my Mom, who was married

them on air, ‘Watch the monitors, or you’re not going to get any of this!’”

And watching out there in TV land were awestruck fans who would go on to shape American and British comedy and have an impact on the culture itself.

Kovacs’ influence is staggering. George Schlatter, producer of “Rowan and Martin’s Laugh-In,” which ran from 1968 to 1973 and became famous for its anti-Vietnam war, anti-Nixon jokes, hung around Kovacs’ set. Kovacs was also a huge influence on “Saturday Night Live,” probably the most influential comedy sketch show ever.

When SNL star Chevy Chase won the 1977 Emmy nomination, he acknowledged his fellow cast members before saying, “I would also like to thank Ernie Kovacs, I swear!”

Terry Gilliam, a member of the British comedy troupe “Monty Python,” which premiered on U.S. public TV in 1977, grew up in Minnesota watching Kovacs. When he was stuck for inspiration, he’d ask himself, “What would Ernie Kovacs do?”

Yippie Influencer

to Ernie from 1954 until his death in a car accident in 1962, ‘You see her laugh, you OK. See her grin, you in trouble.’”

Hair-trigger volatile or not, Mary was proudly Hungarian. A guest at the Kovacs’ home during their flush period remembered “Mary’s buffet table decorated in the colors of the Hungarian flag, red and green: all new green twenty-dollar bills under the red paprikas and stuffed cabbage.”

Buster Keaton, Groucho Marx and Kovacs’ best friend Jack Lemmon attended his funeral. Pallbearers included Frank Sinatra, Dean Martin and Charlton Heston. So, how come Kovacs reached such heights in American comedy?

Kovacs received an acting scholarship to the New York School of the Theater in 1937. He began acting in summer stock theater in 1938. In 1939, he caught

pneumonia and became so ill he was in a pauper’s hospital in New Jersey for 10 months and not expected to live.

Looking beyond comedy, Kovacs was an influence on the Yippie activists ( members of the countercultural Youth International Party) who, as Pat Thomas writes in an excellent essay included in the book, “revolutionized political activism in the 1960s.”

One of their stunts included shutting down the New York Stock Exchange by “dropping dollars onto the floor, which traders fought over.” As Thomas says, “Kovacs’s comedy was apolitical, but his style helped inspire a later generation of leaders that led young people against the bogus Vietnam War.” Musically, Kovacs influenced Alice Cooper, Frank Zappa and the New Wave band Devo. The great Hungarian-American jazz guitarist Gábor Szabó was a fan.

Kovacs and Cigars

When he finally got out of the hospital, Kovacs became a cigar salesman. So began his lifelong association with cigars. Photographs taken at the scene of the car crash that killed him show an unlit cigar near his outstretched fingers.

Incidentally, the pastor of the church where his memorial was held said Kovacs told him, “I was born in Trenton, New Jersey, to a Hungarian couple.

I’ve been smoking cigars ever since.”

The connection between Kovacs and cigars lasted decades after his death. To support herself and pay off the colossal debts Kovacs left her with, his wife Edie Adams – Josh’s mother – advertised cigars for many years.

Kovacs’ got his start in broadcasting on the radio, working for Trenton station WTTM. He spent nine years there.

During that time, he pulled stunts like trying to see what it was like to be run over by a train (hopping off the tracks at the last minute, in case you wondered). In

January

1950,

Kovacs moved over to television, a medium made for him.

As Ben Model writes in “Ernie in Kovacsland,” Kovacs created “comedy sketches that worked on the small screen in people’s homes. When he was forced to have a live audience, he’d tell

Buster Keaton, Groucho Marx and Kovacs’ best friend Jack Lemmon attended his funeral.

Pallbearers included Frank Sinatra, Dean Martin and Charlton Heston.

Today, Kovacs’ reputation is kept alive by Josh Mills and Ben Model, who curated DVD collections devoured by fans old and new from the

1990s onwards.

Mills regards himself as “the keeper of the flame.” For him, Kovacs’ comedy is timeless.

“Ernie didn’t reference contemporary politics,” he told me. “His take was if anyone took themselves seriously, they deserved a pie in the face, thrown by him.”

Model credits Kovacs for inspiring him to think “not just outside the box but to realize there’s no box.”

For Pat Thomas, Kovacs is “artistically subversive. He remains popular because there’s nothing else quite like him.

Unlike so many comedians, he never spoke down to an audience.”

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Rock Opera to Launch Margaret Island Theater Season

Culture Matters A regular look at culture issues in Hungar y and the region

The Margitszigeti Színház (Margaret Island Theater) will open its 2024 season with a day-long family program on Sunday, May 19, for Pentecost (also known as Whitsun) celebrations.

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During the day, a Pentecost king and queen will be chosen from among young people at what the theater promises will be “a spectacular event that will bring Pentecostal folk traditions to life with music, dance and games.”

The highlight of the day event will be the highly acclaimed Hungarian rock opera “The Gospel of Mary” on the main stage on Margaret Island.

As the title implies, the show centers on the story of Mary, the mother of Jesus, and motherhood. It traces events from Mary’s youth, through the birth and death of Christ on the cross, to Mary’s ascension.

“The rock opera’s message today is a portrayal of the female destiny, with all its beauty and pain. Returning to the Margaret Island open-air stage, this production has a special place in the history of Hungarian theater and culture,” the organizers say.

Barbara Bordás as Mary, Sándor György-Rózsa as Jesus. Photo by Vera Éder / Margaret Island Theater “It is able to show the sacrality, the greatness of divine power, the allconquering strength of love, and at the same time human feelings, doubts, fears and the spiritual background of decisions.”

The theater describes the musical work

by László Tolcsvay, Péter Müller and Péter Müller Sziámi as “a worthy counterpart to [Tim Rice and Julian Lloyd] Webber’s world-famous ‘Jesus Christ, Superstar.’”

It goes on to say of the show: “The rock-based orchestral sound, complemented by symphonic music, represents a unique Hungarian musical

News in Brief Culture

Sopron Uni, National Theater, SzFE Sign Cooperation Agreement The University of Sopron, the National Theater and the University of Theater and Film (Színház- és Filmművészeti Egyetem or SzFE) are strengthening their strategic partnership with a cooperation agreement, the University of Sopron said in a press release on Jan. 20.

The theater and the universities will cooperate in creating joint training, teacher exchanges, submitting joint tenders, and organizing cultural events. Attila Vidnyánszky, the director general of the National Theater, Enikő Sepsi, the rector

of the SzFE, and Attila Fábián, the rector of the Sopron University, signed the tripartite agreement on Friday in the capital’s theater.

Ancient China Exhibition Draws 62,000 Visitors An exhibition showcasing treasures from ancient China drew close to 62,000 visitors to the Ferenc Móra Museum in Szeged (170 km southeast of Budapest), the institution said on Jan. 9. The first part of the exhibition, featuring soldiers of the Terracotta Army of Qin Shi Huang, the first emperor of China, opened at the museum on May

style, which can take the dramatic line of the rock opera genre (i.e., the story) to the heights of stage visuality.”

The cast includes Barbara Bordás as Mary, Sándor György-Rózsa as Jesus, Tamás Földes as John the Apostle and opera singer Levente Molnár in the role of Herod.

The production is directed by Tamás Juronics, with scenery designed by Balázs Cziegler and costumes by Mari Benedek.

The performance will also feature the Szeged Contemporary Ballet and the orchestra and choir of the Győr National Theater.

26, 2023. The second part, dubbed “Treasures of Ancient China: The Age of the Jade Emperors,” opened on June 24 and included objects from the Han dynasty on loan from several public collections in China.

Among the highlights of the exhibition was a jade burial suit. The exhibition finished on Jan. 7, although pieces of the Terracotta Army will remain on display as part of another exhibition that will open at the Ferenc Móra Museum later this month.

China National Acrobatic Troupe Wins Gold Prize at Circus Festival The China National Acrobatic Troupe has won the Gold Prize and the Budapest Grand Prix at the 15th Budapest Circus Festival, a biennial international contest hosted in the

Pentecost or Whitsun is one of the most important Christian festivals, recalling an event recorded in the Acts of the Apostles. It is held on the 50th day (the seventh Sunday) after Easter Sunday and commemorates the moment the Holy Spirit filled Mary and the Apostles in Jerusalem.

Some see it as the moment the Christian Church was born.

capital. The Chinese troupe won for a show of bicycle balancing stunts, the Capital Circus of Budapest said.

The Gold Prize was shared with Troupe Zola from Mongolia, which brought a board act to the contest. Sun Lili, the creative director of the China National Acrobatic Troupe, was presented with the Lifetime Achievement Award by the Capital Circus of Budapest.

Circus artists from around the world competed at the Budapest Circus Festival from Jan. 10-15.

Hungary Hosting Austrian Derby Hungary will host the Austrian Derby for the first time this year, Minister of Defense Kristóf SzalayBobrovniczky said in a post on Facebook. Budapest’s Kincsem Park will host the Hungarian Derby on July 7 and the Donau Derby on August 4, SzalayBobrovniczky said.

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www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2024

Chamber of Commerce Corner

Socialite | 19

This regular section of the Budapest Business Journal features news and events from various international business chambers. For further information and to register for specific events, visit the organizing chamber’s website. If you have information for inclusion on this page, send an email in English to Annamária Bálint at annamaria.balint@bbj.hu

Hungarian-French Chamber of Commerce and Industry (CCIFH)

Look out for the chamber’s next free Zoom webinar: “A Tour of the CEE Countries (PECO) in 45 Minutes.” Experts from the six Franco-bilateral Chambers of Commerce and Industry from Central and Eastern Europe (the Czech Republic, Hungary, Poland, Romania, Serbia, and Slovakia) present this regular English-language series investigating the latest economic trends and news in the region.

• When: Wednesday, Feb. 14, from noon.

• Fee: Free of charge, but prior registration is required.

Italian Chamber of Commerce for Hungary (CCIU) The CCIU renewed its commitment to projects aimed at strengthening the promotion of “Made in Italy in Hungary” by hosting an informal meeting at its headquarters between Marco Rossi, head coach of the Hungarian national football team and former Italian footballer, and the President of the CCIU Bernardino Pusceddu.

The meeting testifies to the chamber’s desire to build relations and bridges that unite the two countries, going beyond a simple commercial union to establish relationships of trust and synergy with the whole Italian system in Hungary or interested in expanding its operations beyond the national borders.

Canadian Chamber of Commerce in Hungary (CCCH)

Join the CCIFH for its next HR club, which will discuss the following topics: What does age-based discrimination mean? What are the conscious and subconscious prejudices that feed it? Should we define and categorize employees based on age? What can an individual do to avoid harmful discrimination in the labor market? What can responsible companies do? What is the responsibility of the current government and the media? Andrea Juhos, managing partner at LHH, is the invited speaker.

• When: Thursday, Feb. 29, noon-2 p.m.

• Where: To be confirmed.

The CCCH invites members and nonmembers to attend its first business breakfast of the year. Rising geopolitical issues, including the RussoUkrainian war, the Israel-Hamas conflict, and Taiwan-China tensions, are transforming shipping on the Red Sea. These all lurk behind the spotlight on the 2024 elections in India, the European Union, the United Kingdom, and the United States. With such criteria, it is almost impossible to determine the global economic outlook for the year. Macroeconomic and capital market analysis will be the main topic of the breakfast, with a presentation

by Tamás Móró, lead strategist at Concorde Értékpapír Zrt., and a roundtable discussion on how Hungary will be able to cope with such economic conditions. The discussion will also feature Attila Vágó, CIO of MBH Asset Management. Csaba László, an honorary professor at Corvinus University and a former Minister of Finance in Hungary, will be the moderator.

• When: Wednesday, Feb. 14, 8.30-11 a.m.

• Where: Concorde Értékpapír Zrt. offices, Alkotás u. 55-61, Budapest 1123 • Fee: Members, HUF 13,500 (plus VAT); non-member price: HUF 23,500 (plus VAT).

Breakfast, coffee and networking are included in the price.

British Chamber of Commerce in Hungary (BCCH)

Swiss-Hungarian Chamber of Commerce (Swisscham) As January is traditionally a month for drawing conclusions from the past year and making plans for the new, Swisscham Hungary will kickstart 2024 with a Year Opening Overview presented by LeitnerLeitner Tax Audit Advisory. The program will focus on experiences in 2023 and an outlook for 2024, taking in economic policy,

tax, accounting and legal perspectives.

The panel discussion will include financial and tax experts and a surprise guest.

This event is open for members only and subject to registration.

• When: Wednesday, Jan. 31, 3-5 p.m.

• Where: LeitnerLeitner Office, Viziváros Office Center, Building “A”, ground floor, Kapás utca 6-12, Budapest 1027.

The BCCH New Year will start with the next CEO Dinner event, with Nimród Kovács, entrepreneur and investor in FirstMed, one of the chamber’s longest-standing private healthcare members. The CEO Dinners feature a luxurious three-course meal with wine and welcome drinks, while guests get to hear from a foremost expert on recent industry developments. Kovács started his 35-year business career as an ad man on Madison Avenue, continued as a cable guy in Denver, and worked around the world setting up and managing cable, media, and telecom businesses such as UPC Hungary for many years before settling back in his native city of Budapest. He now enjoys a more peaceful life as an investor, philanthropist, and nature-loving vintner.

• When: Thursday, Feb. 8, 5:30-8 p.m.

• Where: Matild Palace Hotel, Váci u. 36, Budapest 1056 • Fee: Members, HUF 28,000 (incl. VAT); non-members, HUF 38,000 (incl. VAT)