The trend towards working from home and the increased construction costs are having serious consequences for office properties. The market is experiencing historic declines.
Amid the home office trend and the construction crisis, the number of newly constructed office buildings in Germany has collapsed. In 2022, 1,563 office properties were completed, as the Federal Statistical Office announced on Thursday. That was 13.6 percent fewer office and administrative buildings than in the pre-Corona year 2019 and 46 percent fewer than in 2002 (2897). “Fewer office buildings were completed since the time series began in 1993 only in 2010 (1533).” At the same time, a good 43 percent less new office space was added in 2022 than 20 years before, it said.
According to preliminary results from statisticians on building permits, the decline in the construction of new office buildings continued. Accordingly, the construction of 1,665 office and administrative buildings was approved last year – 16.6 percent fewer than in 2022.
Commercial real estate is also in crisis
Since working from home has become firmly established in the world of work in the wake of the Corona pandemic, there are a lot of empty offices in Germany. Companies are selling off space and investors are shying away from buying office buildings – the prices for such properties have plummeted. At the same time, increased interest rates and more expensive materials are dampening new construction, even if the increase in construction prices moderates in 2023.
The commercial real estate crisis is already weighing on banks’ balance sheets, especially in the United States, where the problem has hit many cities. In this country, the turbulence is causing problems for real estate financiers such as Deutsche Pfandbriefbank and Aareal Bank.
According to the statisticians, there was an even greater decline than in the construction of new office properties in commercial buildings, where, in addition to increased construction costs, the trend towards online shopping is also having an impact. The number of completions there has fallen by a good quarter of the pre-Corona level and has reached a low: 887 commercial buildings were built in 2022, compared to 1,196 in 2019. The retail space also fell during the period – by almost 33 percent to 1.47 million square meters.
Source: Stern
