Real Estate

Real estateHow the market for office properties continues after the crisis

Office building in Munichimago images / Westend61

A few weeks ago, the short message service Twitter officially gave its employees the “lifetime home office”. Even after the crisis, Twitter employees should be free to come to the office or work at their desk. The Covid 19 pandemic has ensured that the home office has now found its way into not only technology companies, but even the most inflexible companies in the “old economy”. As a result, many investors fear a slump in the office market. Because if significantly more people will work from home in the future, the conclusion is that fewer offices will be needed – and prices will plummet.

Sven Carstensen, branch manager at the analysis and evaluation company Bulwiengesa in Berlin, gives the all-clear. In his opinion, the trend towards home work will not have a lasting impact on the office property sector. “The home office has become socially acceptable and will certainly be used more in the future – but not permanently,” he says. He assumes that office workers will continue to work from home one or two days a week after the corona crisis. “But there will be no permanent relocation of the workplace to the private home,” Carstensen is convinced.

More vacancy in office properties

Another risk for office investors: if the economy is in a difficult situation, the number of employees drops, and more jobs remain empty. However, according to Carstensen, office workers are not among the hardest hit groups in the Corona crisis. “There will certainly be a large reduction in the number of self-employed and precarious workers,” he predicts. In contrast, he expects less severe job losses in classic office jobs. This is also because the economy flourished before the crisis. “If we look at the developments on the office market on an annual basis, it shows that the first three months saw a very strong increase in jobs,” says Carstensen. With the start of the corona pandemic, it was over. “Nevertheless, we expect a slight plus in the year-round effect,” he explains. For the coming years, Bulwiengesa experts are assuming that the number of office workers will remain at a stable level and that growth will only lose momentum.

The crisis will not leave the office market with no trace. “Overall, vacancies will rise again and rents will be lower again. We have reached the end of a ten-year cycle with rising rents, ”says Carstensen. Nevertheless, the market should remain attractive for investors, he estimates – and points to the comfortable situation before the pandemic. “In Berlin we almost had a full rental with vacancies of 1.3 percent and less. So the crisis turns an unhealthy market with too high demand and too little supply back into a healthy one, ”says the expert.

Carstensen advises investors to check whether there are corona risk groups in their portfolio. This includes full rentals to travel providers or airlines. “If you have a certain willingness to take risks, you can try to bargain in the B and C locations with providers who are under pressure to sell,” he says. “Otherwise, I would advise you to keep your feet still.” The continuing uncertainty speaks against larger investments: Nobody knows whether the risks in the market have already been adequately priced in.


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