Office Tenant Survey: Nearly Two out of Three Occupiers are Not Planning to Downscale their Offices over COVID-19

• Eight percent of the respondents plan to expand their premises


• 13 percent intend to reduce their office footprint


• Only 14 percent of the companies polled offer no home office option


• Desk sharing practised only by a minority of companies


• Trend toward shorter lease terms, opening up opportunities for investors

Berlin, 13. October 2020 – In a poll that RUECKERCONSULT conducted among office tenants in September 2020, around 60 percent of the respondents stated that they are not planning to change the size of their offices due to COVID-19. A total of 210 companies participated in the survey. Only 13 percent of these intend to downsize their premises, while another 14 percent have not yet made up their minds. Eight percent of the survey respondents are planning to expand their floor space in order to ensure that minimum distances are observed. The survey findings were discussed with Michael Schöneich, Commercial Director of ISG, Ken Kuhnke, Head of Lettings Management and member of the senior management of HIH Real Estate, and Mathias Gross, member of the board of Polis Immobilien AG, within the framework of an online press conference.

Working from home has become a firmly established part of Germany’s corporate culture lately. Only 14 percent of the respondents have not given their employees the option to work from home. Another finding is that working from home does not seem to have made people more productive. Only ten percent of the corporate respondents reported an increase in productivity, whereas 23 percent said that productivity had declined. Shifting workplaces or sharing desks are options that remain more or less the exception in German office reality. The overwhelming majority of respondent tenants stated they do not use this form of office organisation.

“Even in the modern work environment, there is no substitute for offices. They guarantee personal exchange, creativity and productivity at the workplace. While the home office will indeed play a role in future, it will quickly lose in significance once the coronavirus crisis is over,” commented Mathias Gross, member of the board of Polis Immobilien AG.
Slightly over one in three companies (36 percent) have not responded to COVID-19 with protective measures in their offices. 20 percent are planning to equip their workplaces with lateral screens, or have already done so. Around 13 percent of the poll respondents use fixed walking routes to reduce the risk of infection. Roughly eleven percent rearranged their cafeteria area or intend to do so, again to minimise the infection risk. Michael Schöneich, Commercial Director of ISG, commented: “As far as we can see, interior layout consulting is a service not readily available on the market. The majority of companies have so far responded without clear focus to preventive measures, or have failed to do more than selective one-off measures. But even at this time it is quite easy to create a COVID-secure office. Moreover, we assume that offices will have larger common areas and more conference rooms. What sets the office apart from your private home is not so much its function as a workplace but its role as a gathering point of high-end design.”

Ken Kuhnke, Head of Lettings and member of the senior management of HIH Real Estate, analysed the current situation on the occupier market for offices: “At the moment, the market is defined by slow decision-making processes, cancellations and postponements. Moreover, tenants and tenant leads are more interested in new tenancies with shorter lease terms due to the experiences made during the crisis. This could translate into opportunities for investors in the medium term. Generally shorter fixed lease terms will make it possible to speed up the upward price trend after things return to normal. We estimate that the office market will recover as early as next year. While working from home is a wide-spread practice now, it will not lead to a general floor-space reduction among office occupiers. Rather, office employment will continue to increase. And working from home will actually accelerate the trend toward larger areas for interacting and collaborating. Whenever remote workers do come in, their in-house stints will focus on exchange and interaction, and thus necessitate adequate space to set up ‘get-together’ zones. Considering this and the takeaways from numerous talks with tenants, I understand that personal work areas may be scaled back, but that the floor space thereby gained will be turned into attractive social areas. Tenants are well aware that the pandemic is going to end at some point and that the shortage of skilled labour will not have gone away by that time.”

“At the moment, the market is defined by slow decision-making processes, cancellations and postponements. Moreover, tenants and tenant leads are more interested in new tenancies with shorter lease terms due to the experiences made during the crisis. This could translate into opportunities for investors in the medium term. Generally shorter fixed lease terms will make it possible to speed up the upward price trend after things return to normal. We estimate that the office market will recover as early as next year. While working from home is a wide-spread practice now, it will not lead to a general floor-space reduction among office occupiers. Rather, office employment will continue to increase. And working from home will actually accelerate the trend toward larger areas for interacting and collaborating. Whenever remote workers do come in, their in-house stints will focus on exchange and interaction, and thus necessitate adequate space to set up ‘get-together’ zones. Considering this and the takeaways from numerous talks with tenants, I understand that personal work areas may be scaled back, but that the floor space thereby gained will be turned into attractive social areas. Tenants are well aware that the pandemic is going to end at some point and that the shortage of skilled labour will not have gone away by that time.”

Ken Kuhnke, Head of Lettings and member of the senior management of HIH Real Estate

Warburg HIH Invest