Office space utilisation up slightly in 2023 despite working from home

21. February 2024
Posted in What's New
21. February 2024 admin

Office space utilisation up slightly in 2023 despite working from home

Property markets around the world are dependent on socio-demographic influences, economic trends and events on the financial markets. Since the lockdowns of the Covid pandemic, working from home has become an integral part of a flexible working model in a large number of companies. This makes some areas obsolete. According to the ifo economic survey from October 2023, around one in eleven companies (9.1 per cent) in Germany want to reduce their office space as part of the switch to more flexible working models. However, according to Prof Dr Vornholz’s latest analysis, other factors will play a much greater role than working from home in the longer term when it comes to demand for office space as a whole, above all further economic development.

Key findings of the current report “Office property – home office – economic situation”:

  • Despite working from home and flexible workplace concepts, the use of office space in Germany increased slightly. The office space used by companies also increased by around 250,000 m² in 2023.
  • Home office trend is declining: Compared to 2021, the proportion of those who spent every working day working from home fell more significantly from 10.1 per cent to just 7.4 per cent in 2022.
  • Working from home has not led to a slump in demand. Further negative effects from working from home are also unlikely in the future, as companies have already reacted in many cases.
  • In the short term, there will be an increase in vacancies on the office markets due to weak demand (especially the decline in GDP) and the still increasing supply (high number of completions)
  • In the long term, the development of the office property market will be shaped by economic growth and thus the development of the office workforce. In addition, structural change (tertiarisation) will also have an impact.

Axel Poppinga, Head of the Real Estate Germany division, sees BVT’s investment strategies confirmed on the basis of this analysis by Prof Dr Vornholz. “The issue of working from home no longer plays a major role in our investment decisions. Like Prof Dr Vornholz, BVT also sees that companies have come to terms with the issue and have developed long-term solutions. These are already largely “priced in” to the market and will hardly have any effect on the vacancy rate. More decisive is the economic development in Germany, which has a much greater impact on the vacancy rate. The slowdown in new construction activity and the drop in building permits also play a role, which will have a dampening effect on the vacancy rate. However, as we focus on office properties with long-term leases, a possible vacancy cycle is less relevant for us. Office properties remain an important investment focus for us. Now that buyers and sellers are slowly converging in their price assessments and we assume that the ECB will make its first interest rate cuts in the second half of 2024, we believe that 2024 is a good time to invest in office property.”