Remote-working share of 25% takes toll on German office market

Around 5% of employees in Germany worked from home before the pandemic, a number that has now increased to roughly 25%. Hybrid working models have become the norm now that the pandemic is over, and companies have reduced the amount of time their employees can work from home. Currently, only 7% of all employees in Germany work exclusively from home, and, thanks to these hybrid working models, companies still need office space. And offices have become more sophisticated with more spaces for teamwork and chatting with colleagues. Before the pandemic, only about 5% of companies looking for space named offices with new-work amenities as their most important criterion. This number has since risen to 33%.

Office demand to drop 12%
84% of all companies in Germany that give their employees the option to work from home intend to continue doing so in the future. This will result in a decline in overall demand for office space in Germany’s top 7 cities, which will lead to a 12% reduction in demand on the office market by 2030, assuming the number of office employees in Germany remains constant. That is the equivalent of 11.5 million sqm of office space.

“We’re currently seeing a clear divergence in supply on the German office market. Modern office space in prime locations that meets new-work requirements is in high demand and rents are rising accordingly. Space that does not meet modern requirements tends to be harder to let,” comments Cem Ergüney, Head of Office Letting at Colliers Germany.

“69% of companies in Germany now offer remote-working options, and that number is as high as 87% at large companies. However, the pandemic also showed how valuable offices are when it comes to collaborative work. These new hybrid working models are the future because they are well accepted by employers and employees and they ensure productivity,” says Simon Krause, author of the ifo Institute study.

60% of office properties impacted
Office leases in Germany have an average term of around 7 years. The impact of hybrid working models will make itself felt on the office market with a delay because only around 15% of all leases are renewed each year. In their study, Colliers and ifo Institute assume that 60% of all office properties in Germany will be affected by this trend overall and that companies leasing space these properties will reduce their requirements by an average of 20%.

“The German office market has traditionally been closely correlated with the ifo business climate index. That’s why it made sense for us to combine our knowledge of the office market with ifo Institute’s survey and analysis data. Our joint study shows how effective such collaborative efforts are and how cautious we should be in making blanket doom-and-gloom predictions about the office market. Although the possible 12% reduction in demand for offices space will be a stress test for landlords and investors, there is no doubt that the asset class will overcome the challenge and be able to effectively reposition itself,” says Andreas Trumpp, Head of Market Intelligence & Foresight at Colliers Germany.

Source: Joint study by ifo Institute and real estate advisor Colliers. All of this is among the key findings of a joint study conducted by ifo Institute and real estate advisor Colliers entitled, “New work models. New work locations: The impact of working from home on the office real estate market.” The study combines data from ifo Institute’s remote-working surveys of 9,000 companies with anonymized information on office lettings between 2013 and 2023 from the Colliers database.

Download the joint study by ifo Institute and Colliers free of charge on the link below:

https://www.colliers.de/working-from-home-study/