The establishment of home offices and hybrid working models is prompting many companies to adapt their office concepts, leading to noticeable changes in the office property market.

Our study shows that companies are downsizing their office space, focussing on desk sharing and expanding meeting and social spaces. Large service companies, which use the majority of office space, are particularly active in this regard by investing in modern locations, modernising their office equipment and improving their IT infrastructure. Around a quarter of these companies are downsizing their office space.

However, the survey results indicate that the majority of office downsizing will only take place in the next few years. At the same time, almost half of the large service companies are making their office use more flexible and modernising their facilities, while one fifth are changing at least one office location. Overall, in the main scenario based on our previous study, we assume a structural decline in demand for office space of 12 % by 2030 due to working from home. As a result, the office vacancy rate will continue to rise and the risk of stranded assets in individual office buildings will increase.

These developments in the office property market affect not only companies, employees, owners and investors, but also urban planning. In view of the declining demand for office space, we are analysing the reuse and conversion potential of office buildings. In particular, we are focussing on the conversion of vacant offices into urgently needed residential space. We assume a technical and building law potential of around 30 % for possible conversions, although only a small proportion of this is also economically viable.

Based on the current vacancy rate plus the expected decline in demand due to home offices, the top 7 cities (Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, Düsseldorf) have a medium-term conversion potential of 5.8 million sqm of office space. Taking into account a 20% loss of space and an average flat size of 77 m2 in the top 7 cities, this results in a theoretical potential of around 60,000 flats. With an average household size of 1.7 people, this could create new living space for around 102,000 people. Due to the limited economic viability of many conversions for residential purposes, we also look at alternative uses, partial conversions and neighbourhood development. Our study concludes that creative reutilisation concepts are required for the majority of obsolete office buildings.

Source: Simon Krause, ifoInstitut Andreas Trumpp, Colliers Dr. Tobias Dichtl, Colliers Susanne Kiese, Colliers Alexander Rutsch, Colliers