- ‘RETHINKING European Offices 2030’ report examines obsolescence risks in 16 key European cities
- By 2030, 64 per cent of the office space stock in Berlin, Frankfurt and Munich will be more than 20 years old
- Repurposing offers potential, especially in decentralised locations
The increasing pressure from ESG regulation, changing workplace strategies, reduced office space demand from tenants, and economic challenges are causing office space in Europe to face growing threats of obsolescence, meaning outdatedness, and the risk of becoming unmarketable and thus unlettable. A new analysis by Cushman & Wakefield, one of the largest property consultancies worldwide, reveals that in 16 key European cities alone, more than 170 million square metres will be at risk by 2030. This corresponds to more than six times the total office stock in Central London.
Vacancy Rates and Space Demand
Vacancy rates in Germany's five largest office markets (Berlin, Düsseldorf, Frankfurt, Hamburg and Munich) already rose by an average of 4.1 percentage points between Q4 2019 and Q3 2024 and are forecast to rise by a further 1.7 percentage points by the end of 2027. In combination with changing requirements for office space and, particularly in terms of space sizes due to the growing prevalence of hybrid working models and the so-called ‘Flight-to-Quality’ trend, older and less competitive spaces are increasingly coming under pressure.
An analysis of new leases over 1,000 m² recently signed by Cushman & Wakefield in Germany shows that two-thirds of tenants are either maintaining or reducing their space at the new location. On average, the newly leased spaces are 19% smaller compared to previous locations. This trend is a direct result of hybrid working models, ongoing economic uncertainty and the growing demand for more efficient, high-quality workplaces.
The German Market: Challenges and Regional Differences
In the top 3 office markets of Berlin, Frankfurt and Munich, between 60 and 70 per cent of the office property stock will be over 20 years old by 2030. This proportion alone poses a significant risk to leaseability, particularly as many of these properties do not meet modern ESG standards.
Repositioning existing properties offers the best solution, particularly in central locations in Berlin, Frankfurt and Munich. However, investors must take into account rising construction costs, which are limiting the economic viability of extensive refurbishments even in attractive city centre locations. This solution involves measures such as improving energy efficiency, integrating modern technologies, and redesigning interiors to meet the demands of modern work environments.
In decentralised locations, the situation is different: comprehensive renovations are generally deemed uneconomical in most cases. I Instead, repurposing properties for alternative uses- such as residential or mixed-use buildings - can be a viable option. The declining value of office space in these locations makes this option increasingly appealing. However, this strategy requires careful analysis of local needs and market dynamics.
Eastern Europe and Germany outperform other European Markets
While Western European markets such as Milan (86 per cent of office stock at risk), Barcelona (81 per cent) and Paris (80 per cent) face greater risk due to their overall older property portfolios, Germany offers a relatively more stable starting position. Regular investments and refurbishments have contributed to a lower proportion of at-risk properties. Nevertheless, cities such as Berlin (65 per cent), Frankfurt (70 per cent) and Munich (60 per cent) show that there is still considerable room for improvement.
In Eastern European markets such as Warsaw (40 per cent) and Budapest (43 per cent), the proportion of at-risk properties is lower. This is primarily because a significant share of office buildings in these markets has been constructed over the past two decades.
Tina Reuter, Head of Germany at Cushman & Wakefield, clarifies: ‘Even though Germany performs relatively well compared to the rest of Western Europe, we face complex challenges in the office real estate sector. The pressure to meet modern ESG standards, combined with changing user demands, make a realignment of many properties essential. Requirements for energy efficiency and amenities make innovative solutions such as flexible workspaces and mixed-use concepts essential. Without targeted investments, a significant proportion of office space will lose its competitiveness in the coming years.
