It’s been three years since the COVIC-19 pandemic emptied offices, introducing teleconferencing and remote working into the work culture. The trend remains.
36% of offices around the world are permanently vacant, according to a new report by Melbourne-based tech start-up XY Sense (XY Sense Workplace Utilization Index). Of the rest, only 14% are used more than five hours a day. And 29% less than three. Among the most utilized, he says, are the 2-3 person meeting rooms, which are on average 90% full.
The report covers the second quarter of the year, with a sample of nearly 25,000 workplaces in nine regions, including the US, UK, Hong Kong and Singapore.
The picture for the third quarter is not expected to be different. Not even after. This is evidenced by the empty office buildings in big cities around the world.
Office vacancies in the US topped 20% in the first three months of 2023. In some cities, they are as high as 25%.
The problem is clearly not limited to US borders. In the financially stifling “steam engine of Europe”, in Germany, the market for office space – which until now was considered a “golden” investment – is heading for the… tartar.
In its seven largest cities, demand was for about 1.1 million square meters: about a third less compared to the same period last year. In their surroundings the drop is even greater.
Even at Gateway Gardens, a modern office complex near Frankfurt airport – a metropolis for the banking and financial sector – almost a third of the space is currently empty.
The various factors that lead to this condition:
- inflationary crisis,
- high interest rates,
- financial insecurity,
- stricter environmental regulations in construction and
- telecommuting
are some of the main reasons for the phenomenon.
There are currently around 1.5 million square meters of office space under construction in Berlin, designed to house mainly start-ups, but investors are increasingly withdrawing from it as part of de-risking.
Overall, the situation seems like a “puzzle” for those directly involved. For some banks, the current situation could lead to serious trouble. Especially when they have financed projects, which do not have a significant equity investment from the builders.
Fears are intensifying about the negative impact on the valuation of vacant commercial properties. The accumulation of empty buildings can create “ghost” areas in urban centers, which repel tourists.
In search of alternatives
1. The most popular option under consideration is the conversion of office space into housing, as an “antidote” to the housing crisis. 30% of office complexes in North America could potentially be repurposed for residential purposes, subject to the necessary alterations of course.
2. Other ideas being considered include facilities for healthcare services, data centers – albeit extremely energy-intensive – or even schools.
3. Other considerations have fallen on the “table”, such as e.g. to convert vacant office buildings into gyms or urban vertical farms.
For the time being, several companies have sublet part of their empty premises to smaller ones, in order to share the costs of operation and maintenance.
In new constructions, mixed-use designs are preferred. In Frankfurt, for example, the FOUR building complex is expected to be completed within two years. The Four skyscrapers will house hotels, apartments, shops and offices.
