The trend towards working from home has noticeably changed the situation in Germany's office buildings. In many company headquarters, a not inconsiderable part of the office floors are now empty on many days.

Christian Siedenbiedel

Editor in business.

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This is particularly evident in Germany's banking capital, Frankfurt: caterers from some bank towers report that they are giving out much less food than they used to – commuters, meanwhile, are observing that car traffic has decreased, especially on Mondays and Fridays.

Figures from the city of Frankfurt on the volume of traffic at least confirm that it is more concentrated than before on Tuesday, Wednesday and Thursday. "This is actually new in this clarity," said a spokesman for the Frankfurt road traffic office. This could support the thesis of the "home office around the weekend".

Meanwhile, the real estate industry is already discussing when the next major institution will announce its plans to correct its future space needs.

Some office floors look quite empty

The Ifo Institute in Munich has now examined the topic in more detail in a survey: According to the survey, the number of jobs in companies that are underutilized on an average day has roughly tripled compared to 2019. "Currently, 12.3 percent of all on-site workplaces are underutilized on an average day. Before Corona in 2019, it was only 4.6 percent," said Simon Krause of the Ifo Institute.

Naturally, there are differences depending on the type of activity in the various industries. Service companies are particularly hard hit. Here, the proportion of offices that are empty on an average working day has risen from 6.2 to 16.8 percent. In the manufacturing sector, the share increased from 3.1 percent in 2019 to 9.6 percent. In trade, the increase from 3.2 to 5.8 percent was rather limited, as well as in the construction industry from 1.7 to 2.5 percent.

The Ifo Institute had recently dealt with the question of whether people are now moving away from their company's headquarters to regions where life is cheaper or nicer because of the possibility of working from home. However, it came to the conclusion that such removals did indeed exist, but that no migration of peoples had begun. This could also be related to the fact that the number of employees who no longer have to appear at their workplace at all is probably manageable after all. In many companies, there are rules that home office is permitted, but only within certain limits.

In this context, the real estate industry is trying not to badmouth the commercial real estate market. "There are many indications that Frankfurt, as an international financial centre and home to numerous companies in the financial and banking sector, will continue to have a significant demand for office space in the future," said Frankfurt broker Rainer Ballwanz. Nevertheless, there could be an impact: "The demand for certain office properties may shift." Companies may prefer flexible office space, which requires fewer long-term leases, as they are unsure how their space needs will evolve in the future.

Some companies are already reducing office space

Deutsche Bank reports that it has realigned its real estate strategy to the new circumstances. "The new hybrid working models have an impact on our real estate strategy," said a spokeswoman: "It is our goal to concentrate on a few buildings, but in return to equip them with a higher standard and, above all, to focus them on collaborative work."

The reduction in space will vary depending on the city and the building. "For the Frankfurt location, this means that we will reduce our office space in Frankfurt and Eschborn by around 2024 percent by the end of 40." The bank will concentrate on three core buildings in the city centre – Taunusanlage, Deutsche Bank Campus and IBC. "We will gradually abandon our locations in Eschborn and Sossenheim – specifically the Technical Centre Eschborn and Frankfurt Europa-Park – by the end of 2024."

More so in America than here

Real estate experts such as Reiner Braun of the Empirica Institute believe that the consequences of this trend are likely to affect older offices in poorer locations in the real estate market.

Sonja Knorr, who monitors real estate funds for the rating agency Scope, said: "Overall, the office investment segment is under pressure because many employees are increasingly staying in the home office even after the pandemic." This is particularly evident in the United States. In Europe, however, demand for office properties in good locations with tenants with strong credit ratings remains high. The rating agency therefore expects stable to only slightly declining real estate values for European office properties in the top segment.

"Our view is different on office properties in B or worse locations, which at the same time cannot meet the requirements for flexibility and ESG," said Knorr: "Their owners must expect falling real estate values."

This is not yet evident in vacancies due to the often long leases – however, subletting offers are currently rising significantly.