TriGranit: Building Climate-smart Solutions

BBJ: Phase I of Millennium Gardens officially opened on September 29, 2022. Where are you with the second phase now?

Károly Dömötör Makk: The second phase is currently under construction; our goal is to hand it over at the end of the first quarter of 2024. So far, everything is on schedule; we do not expect any delay in the handover.

BBJ: Is phase I fully occupied, and do you have any pre-lets for phase II?  

KDM: The current occupancy rate of the first phase is 95%, while the second phase is waiting for its future tenants, but we are in advanced negotiations with potential tenants for about 50% of the building.

BBJ: You described phase I as “an exemplary showcase of ESG development practices.” Will phase II match it or go even further? 

KDM: The second phase will match all the ESG criteria of the first phase, with some differences in terms of individual tenant need and fit-out designs. Still, the principal green solutions (for example, heating provided by heat pumps, motion-sensing LED light sources that allow tenants to avoid energy waste, intelligent building management systems, energy-efficient elevators and air conditioning, water-saving faucets and shower heads) will be the same.

BBJ: How does developing to such a high level of ESG change the mix of tenants you can attract?

KDM: The real estate and construction sector accounts for about 40% of greenhouse gas emissions globally, with 28% attributable to the daily operation of buildings alone. Buildings also affect the health and well-being of their tenants and the communities within which they are embedded. Pursuing positive impacts in this space will create value and attract ESG-conscious tenants. In the past, meeting ESG requirements were seen as “nice to have,” but now, given strict ESG requirements and changing government policy, this will need to be treated as a priority.

Tenants (not only multinational giants but also local SMEs) are now actively, sometimes exclusively, seeking spaces that are certified accordingly and offer a place where employees are happy to work to enhance their employer attractiveness. According to a PwC survey, almost 90% of employees preferred to support or work for companies that cared about the same ESG issues they do. To support this sentiment further, a recently published report states that, by the end of this decade, the Millennial and Gen Z generations will constitute more than two-thirds of the world’s workforce. These generations place a greater emphasis on social and environmental concerns than their predecessors, and they will expect more from their employers on these issues. Meanwhile, the price of not caring about ESG just got higher. In France, for instance, the décret tertiaire will start applying fines to those companies not taking action to apply carbon-cutting initiatives. In the United States, the price tag for non-adherence is also increasing, with one firm receiving a fine of almost USD 10 million for misrepresenting their environmental compliance. Evading these penalties requires the creation of an immediate ESG action plan. 

At TriGranit, we offer our tenants more climate-smart solutions that will advance their climate (and ESG) efforts as well as our own. 

BBJ: Beyond ESG, what are the latest trends for the office market?

KDM: Although leasing activity across Europe held up reasonably well in 2022, there is a widespread consensus that a recession will lead to declining occupancies, even in previously robust sectors. On the other hand, the office employment environment offers a competitive advantage for the economy of Budapest compared to many of its peers in CEE. Global firms in finance, insurance, accounting, and business consultancy provide these jobs, and the pandemic has hardly restrained the ICT industry, which has become the city’s largest sector. The surge in office employment in Budapest was the strongest in the region since 2015, and this trend is expected to continue.

This article was first published in the Budapest Business Journal print issue of May 5, 2023.