The Impact of the Home Office Trend on Office Space and Real Estate Market: A Lasting Effect Even After the Pandemic

Cities around the world have to adapt to the long-term absenteeism of many office workers. In Germany, even after the end of the corona pandemic, a good quarter of employees work from home. This can be seen in regular surveys by the Munich Ifo Institute. According to the McKinsey Global Institute, the proportion of home workers is even higher in some international metropolises.

This has an impact on the office real estate market: In Germany, new lettings fell by 40 percent in the first half of the year, as the real estate service provider Jones Lang LaSalle (JLL) reports. “Twenty percent is the home office effect, the other twenty percent the effect of the economically uncertain situation”. Says Stephan Leimbach, Head of Office Rental Business at JLL.

According to Leimbach, the second half of the year is traditionally better than the first. “For this year we are assuming that around 2.8 million square meters of office space will be re-let.” Compared to last year’s 3.6 million square meters, this is a drop of a good 20 percent.

The home office quota in Germany has been stable at 25 percent of employees for a year. Reports Simon Krause, home office specialist at the Ifo Institute. “We assume that this will remain the case.” Before the pandemic, it was only 10 percent.

Unused office space is expensive, and in economically uncertain times many companies decide to downsize. “My impression is that companies are shrinking by an average of 20 percent,” says JLL manager Leimbach. The shrinking office trend will probably continue. According to estimates by the McKinsey Global Institute, the demand for office space will continue to fall until 2030.