The office is not dying out

The office is not dying out

Regardless of the corona-induced trend toward working at home, the office will not disappear from everyday working life in germany in the foreseeable future.

While companies have leased far fewer new offices since the spring than they did before the pandemic, there has been no flat-lining trend in the cancellation of office leases. Economists, brokers and business consultants do assume that corona will have a long-term impact on everyday working life – but what form this could take is not yet clear.

In the second and third quarters, german companies leased only half as much new office space in each of the top seven cities as the long-term average, according to market data from savills, a major international brokerage firm. Instead of one million, only half a million square meters were newly leased per quarter. "The only exception is the public sector," says matthias pink, head of market observation at the british company’s german subsidiary.

But does this mean that companies no longer need offices across the board?? Not at all: "many companies currently prefer to extend their current leases," says pink. "The vacancy rate has risen for the first time since 2010, but only slightly. In the top seven cities, even more office space is currently leased than at the beginning of the year."

Conversely, landlords currently have little or no interest in providing water to commercial tenants, even if they are experiencing financial difficulties. The search for new tenants is currently difficult. "In the short term, commercial landlords and property owners are more concerned with stabilization, with holding on until we get back to a new normal," says financial market expert philipp wackerbeck of strategy&, the management consultancy of the international auditing firm pwc.

"As a landlord or owner, you do everything you can to maintain the existing situation, even if that means restrictions on rental income. A lot of real estate in germany is solidly financed, so you can stand it for a while."

And what does it look like in the long term? Some people are already saying that the office is an old-fashioned workplace of the past, virtually doomed to extinction. "The topic is hotly debated, but the truth is: none of us knows," says economic researcher ralph henger of the institute of the german economy (IW) in colonia.

One prominent large company that plans to keep some of its employees in home offices on a permanent basis even after corona is siemens. The goal is for office employees to be able to work at home two to three days a week in the future. But whether siemens will need less office space in the future cannot be estimated, as a spokesman for the munich-based dax company’s real estate company says.

A question that not only siemens is concerned about: "in the future, many companies may need less office space because employees are working more and more from home," says management consultant wackerbeck. "However, this will not be possible on a one-to-one basis, because employees will probably be distributed among larger offices after the pandemic than before. You might need more flat per employee again to comply with spacing rules and the like."

So far, no one has fully analyzed the long-term overall effects. "Office is not office, it also depends on the location," says wackerbeck. "Real estate, both office and residential, will be more stable in value in A-locations than in B- and C-locations."

Demand for office space has actually picked up again in the past month or two, says economist henger of IW koln. "The topic of home office may become important in the future, but so far it has shown little effect." Many companies could not shift their work from one day to the next for organizational reasons.

Psychology also plays a role. Traditional reservations that the staff could laze at home have not disappeared overnight. Some companies don’t want to be that flexible, says henger. "They prefer to see their employees in the office." How demand for offices will develop next year and the year after is an open question. "The central factor is the economic development."

The pandemic will therefore most likely have a long-term effect on the organization of work – but it is not yet possible to say anything more precise. "It will change somewhat, but the adjustment process will take many years," says savills expert pink. "The more important question: what kind of office do we need in the future and where do we need it??"

Leave a Reply

Your email address will not be published.