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75 million square meters of office space is threatened with obsolescence – what now?
Chemnitz in focus: Analysis of the challenges and opportunities for office space in the city until 2025 - revitalization and conversion.
75 million square meters of office space is threatened with obsolescence – what now?
What is happening in the German office space landscape? A close look at the current market situation shows that in German A and B cities around75 million square meters of office spaceare threatened by economic obsolescence. This emerges from a comprehensive study carried out by PwC Germany, Garbe Institutional Capital and Colliers. This makes the situation tricky, especially in the context of stable home office rates, which are forecast to reduce demand by up to24 million square metersentail.
The challenge for investors and real estate developers now lies in the necessary revitalization of these areas in order to meet the current ESG requirements. But not all office spaces are the same. According to estimates, only30 to 35 percentof the threatened office space is suitable for conversion into residential or life science properties. While such a repurposing could hypothetically be up to200,000 new apartmentscould create, the majority of the areas remain unsuitable due to their structure.
Alternatives and opportunities
An even more differentiated look shows that65 to 70 percentThe threatened office space currently has no direct chance of being converted into residential or life science projects. Nevertheless, there is hope: In addition to living space, conversion into other areas such as retail, educational institutions or even refugee accommodation could also be considered. However, one must keep in mind that these alternatives also have limited potential.
How can the sheer enormous volume of potentially obsolete office space be reduced? One possibility would be a targeted revitalization of existing properties. The current market situation shows that rising rents for modern office properties could increase the profitability of revitalizations. With a clever approach, investors and project developers can make good business here.
Housing and life science as a way out
The study also placed a clear focus on conversion in the areas of housing and life sciences. There are exciting perspectives here. The residential segment in particular remains economically attractive in the long term due to high excess demand and limited supply. At the same time, the life sciences sector offers opportunities for sustainable growth, particularly through technological innovations and growing demand. This is clear from recent discussions and analyses, as well finanzwelt.de shows.
This makes it all the more important to keep a close eye on the regulatory and political requirements, as they can have a decisive influence on the economic viability of conversions. The ball is now clearly in the court of the decision-makers in the real estate industry who have to face this challenge.