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Commercial real estate: Falling demand and prices

Commercial real estate: Falling demand and prices

The modern working world is flexible: The majority of people now work not only in the office, but also from home – or even completely remotely. Many companies are therefore reporting unoccupied desks and empty spaces. The result is falling demand for commercial real estate: a development that is having a lasting impact on the real estate market and rents.

From office complexes to hybrid districts

A recent study by the McKinsey Global Institute examined the value of office space in nine major cities, including New York, London, Beijing and Munich. It clearly shows that the shift towards mobile working is causing rental prices to fall – and with them the value of real estate. According to McKinsey, this process will continue. In Munich, for example, the demand for office space could be 27 % lower by 2030 than in 2019, even before the coronavirus pandemic.

However, the impact on commercial real estate in the USA is even more serious. The reason for this is the cityscape: While US metropolitan areas focus primarily on city centers with office complexes, European and Japanese corporate spaces are surrounded by quality of life – i.e. living space, shopping facilities and cafés. This makes the workplace more attractive and offers employees motivation to visit the office.

Advantages of market development

So how can existing offices take advantage of this real estate development? Hendrik Grempe, CEO of workplace consultancy Combine, sees the state of the industry as an opportunity to rethink. After all, unused space and working from home offer the ability to restructure space in commercial properties. The sale of office space also makes sense, as Grempe explains: “In many cases, the potential for saving space in offices is much greater than expected.” In both cases, operating costs can be reduced.

However, an ill-considered reduction in space or the elimination of a location is not a one-size-fits-all solution. “The efficiency of an office depends on the type of company in question,” adds Manuel Panzirsch, CEO of ReCoTech. That’s why adapting the premises always requires an inventory:

  • How does the business function?
  • How do the employees work? What types of tasks are there?
  • Who needs to communicate with whom?

The aim is then to find a space concept that focuses on two points: the profitability of the company and the satisfaction of the employees.

ReCoTech is the partner of choice when it comes to restructuring office properties: The status quo of the space used can be analyzed on the basis of defined, company-specific parameters. The algorithm-based space optimization tool calculates the best possible and most space-efficient use of space at the touch of a button. This makes it possible to make data-based decisions – economically, resource-efficiently and sustainably.

» Request a demo here

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