More than three-quarters of Europe’s office buildings are at risk of obsolescence by 2030 unless landlords invest in improvements or find alternative uses, Cushman & Wakefield has warned at the MIPIM 2023 conference in Cannes – CoStar reports.
The report presented at the world’s leading real estate event analysed 218 million sqm office stock in 11 countries across Europe by age and grade; construction and completions; and occupier demand trends and utilisation since the pandemic.
Landlords are urged to act
The researchers found that the combination of changing work patterns, occupier demand, increasing legislative actions around minimum sustainability standards, and an uncertain economic backdrop are behind the stark risk to office assets. Hybrid working patterns have also led office occupiers to seek higher-quality workplaces meeting the latest environmental, well-being and digital connectivity standards. This top-quality space accounted for over half (54%) of total European office demand between 2019-22. This trend is expected to intensify as demand exceeds supply in markets including Prague, Budapest, Milan, Warsaw, Madrid, Barcelona and London.
Landlords are urged to act now to mitigate the impact on their portfolios as around half of Europe’s existing office stock is over 30 years old and only 14% has been built or modernised in the last 10 years.
From top to bottom
According to Cushman & Wakefield’s analysis, the current office stock can be split as:
Top: around 24%, built in the last decade, fits modern office usage and is in high demand.
Middle: a large proportion of 62% requires repositioning to avoid deterioration.
Bottom: 14%, ageing, non-updated stock that is in many ways already obsolete.
“Across Europe, there is strong demand for offices, but occupiers drive the market and they are increasingly focused on the very best workplaces. For owners of older, lower-quality assets, doing nothing is not a strategy. Landlords that reinvest in sustainability credentials, amenities, sense of place and community engagement to move their assets into top-quality ratings will benefit from this flight to quality. Those that do not will face diminishing returns.”- James Young, head of investor services EMEA & APAC, Cushman & Wakefield
There are many solutions
According to experts, there are many solutions that can address sustainability requirements and tenant needs. These include repositioning the asset to upgrade its amenities and sustainability, or through community-oriented offerings and events. It can also be to repurpose all or some of the office for other uses, such as residential, industrial, life sciences or healthcare.