According to a Capital Economics report, in line with the experience of malls, the structural nature of this hit to demand means the 35% plunge in office values are forecasted by end-2025 that is unlikely to be recovered even by 2040.Capital Economics research released last week finds that office sector values will not return to pre-Covid levels until around 2040. The above conclusions are based on moving people away from city centers, hybrid work and remote work.
"The decline in office demand due to remote work will cause a hit to net operating incomes equal to or worse than what malls have experienced over the past six years," the report's authors said. "And based on the mall experience, the structural nature of this demand hit means that the 35% 'plunge' in office values we forecast by the end of 2025 is unlikely to stop even by 2040," they added the same sources.
According to Kastle Systems, office space occupancy is less than 50% nationwide. Before the pandemic this percentage was close to 80%. The COVID pandemic brought remote work and now millions of workers have returned to hybrid or fully remote work (Digital Nomads), reducing the need for large office spaces. This decline has led property owners and employers to incentivize personal work with amenities and flexible workspaces, according to a Forbes survey.
"Green" buildings
"Green" and modern office buildings dominate in terms of demand in the Greek office market where, as market executives recently stated at the 16th RED Meeting Point, there is a great shortage. Domestic REICs have recently been acquiring typical, middle-aged properties, on main road axes and in the center of Athens to "transform" them into new modern buildings, creating a product that is immediately rented out. At the same time, the newly built green buildings entering the market with rents in the region of €30 to €35 / per square meter are also few but significant (data from the first quarter of 2023 from the Geoaxis Observatory).
According to the executives of the real estate market, the yields recorded in high-end offices in Athens reach 6%, while the corresponding index in Rome amounts to 4.1% and in Lisbon to 4.5%. In the domestic market, hybrid work is increasing, however, after the end of the anti-coronavirus pandemic measures, most workers seem to have returned to physical office spaces. Yields remain high and vacancy rates low, offering a stable solution in an industry under intense pressure internationally.
