Investment in offices plummets by 50% due to loss of business

2024-01-21 14:00:39

The office market continues to be immersed in its transformation, gaining ground on teleworking and seeking to differentiate itself to be competitive in a segment in which investment has sunk by 53% in 2023 and in which the destiny for many only involves renewing or changing location. use. After the initial impact of the pandemic and the emergence of teleworking, there is a gradual return to work with the hybrid model as the clear protagonist, which is forcing many offices to transform their spaces to gain more attractiveness among their employees and others to hire less space. What all experts agree to point out is the limited availability of quality space, sometimes even zero, especially in city centers, where rents continue to rise.

What impact does teleworking have today?

Teleworking has been implemented to a greater or lesser extent in almost all organizations, which is not always linked to a lower need for space. The true impact is that it has forced them to adapt to new trends (technological advances, more attractive, quality, sustainable spaces, etc.), says the head of offices at BNP Paribas Real Estate, Benjamín Gómez. According to a CBRE study, Spaniards go to the office on average almost three days a week and individual jobs are being reduced, giving way to ‘hot seats’, says the senior director of Office Advisory & Transaction of the firm, José Mittelbrum.

Less space availability?

JLL maintains that some companies have reduced their demand for square meters in favor of having higher quality offices, which has increased availability in certain areas, especially peripheral ones. However, well-located buildings with good features are those with higher occupancy, explains its “head of Markets”, Adriana Gorri. This increase in demand in central almonds has put upward pressure on rents. On the contrary, in the peripheral areas the threat of tenants leaving for more central areas has caused certain adjustments, adds the national director of offices at Colliers, Martín Galbete. The shortage of product and high demand in central areas has placed rents in these areas above 30 euros/m2 per month, and in the most prime assets of Madrid at 40 euros, which has not been seen since 2007.

An investment rebound is expected

For 2024, BNP Paribas Real Estate foresees an increase in investment supported by better macroeconomic prospects, the stabilization and possible lowering of rates and the increase in sales processes that are underway. After registering more than 1,200 million in 2023 (11% of the total) and falling 53% compared to the previous year, CBRE expects that the first half of 2024 will be similar and that the focus will be on operations of between 5-25 million and in higher quality and well located assets.

What will happen to the free space?

It is likely that in some submarkets, especially where there is an oversized park, offices will have to be transformed to other alternative uses that benefit society, Colliers acknowledges. These changes can be towards residential or hotel assets, although other options involve subletting or rehabilitating the buildings to adapt them to new demands, JLL adds. According to CBRE, in Madrid alone there are more than 300 lower quality office buildings totaling 1.5 million square meters. It is in these more obsolete buildings with less occupancy where they see an opportunity to convert to other uses, a process that experts agree is complex and requires the push of the administrations.