The International office sector in 2022

The appeal of purchasing office space for the majority of professionals is the opportunity for increasing the property's equity. If the property's value increases over time, the office can end up being a smart investment option.

More than ever, the real estate industry is currently faced with a variety of opportunities and challenges. Working remotely or in an office will no longer be how we currently do it. The past few years have given us the opportunity to fully comprehend how various working methods have been implemented on a big scale and to apply them to corporate cultures and circumstances.

The IEIF report indicated “Over the last 10 years, there has been more and more working at home but before the lockdowns an estimated two-thirds of it was done on an informal basis. The legal recognition of home working means it is much more structured and will have more of an effect on the business property market.”

Different Office Types

Traditional Office Space - The classic office space plan is typically the most effective for financial services companies, hedge funds, and legal firms. 

Creative office space- Open/plan offices, whether in traditional or coworking settings, have recently come to be associated with a creative workspace.

Contiguous Office Space- Contiguous space refers to several suites that are merged and rented to the same tenant on the same floor of a building.

Coworking Space- provides flexible terms for using a number of desks in an open office environment, which typically also includes meeting and break-out spaces. They mostly assist small businesses and startups who want temporary workspace.

Executive Suites - have been leased to another business which contain fully serviced work spaces. Executive suites include sublets with flexible periods. The majority of private suites provide month-to-month rent or 12 month increments. 

Best to Least Performing European Countries in the Office Sector

(Data from BNP Paribas 2022 Real Estate analysis)

  1. Italy 

The office sector once again had the highest performance in the third quarter of 2021, accounting for 37% of all investments in commercial real estate in Italy, or €870 million. Despite being the industry Covid has had the least influence on, the logistics sector came in second with €800 million spent; growth was nevertheless 60% over the same period in 2020. The revival of the hotel industry is also significant; when compared to the third quarter of 2020, an increase of 40% was seen, with investments totaling €375 million.

  1. Germany 

The office market is improving, The Covid-19 outbreak had a large impact on the German office market, but it now seems to be on the mend. With take-up of about 3.4 million m2, the second half of the year saw a considerable growth across all major real estate centers, surpassing the first-half result by a sizable 26.5 percent. Berlin's annual total take-up reached 834,000 m2, and Munich saw a 16 percent growth and  The vacancy rate in Cologne fell by 10%.

  1. France

France, like many other nations, has had to adjust to a new arrangement involving distant work. The Institut Paris Région and Transilien SNCF believe that the health crisis has made working from home possible for 45% of individuals in the Ile-de-France (the region that includes Paris) business park, one of the largest in Europe.

Even though people may visit the office less frequently, when they do, they have high expectations because they want more services, chances to mingle with coworkers, and a better sense of wellbeing.

4. London 

Like most cities in Europe, London is struggling to adjust to a new office market that combines being in the office and remote working. 

2.86 million square feet of space were taken up in Central London during the first quarter of 2022, up 50% over the same period in 2021. Due to an increase in deliveries as development picks up steam, supply grew to 19.2 million square feet, a 10% rise from Q4 levels. 8.7%% was the vacancy rate in Central London, which was somewhat higher than the 7.9 percent recorded in Q4. In Q1, £4.9 billion worth of transactions were made in the Central London office investment market. The market experienced its strongest first quarter in five years, showcasing London's superior liquidity and structural strength in comparison to rival markets. The average lot size reached historic highs during the quarter as a result of several sizable transactions.

Considering the USA Office Sector 

(Data from CREXI’s 2022 USA Market Study)

  1. Nashville, Tennessee

Nashville ranks as the top real estate market for investor demand, as well as the top market for office investment in 2022, according to Emerging Trends. Nashville's population has grown by almost 15% over the previous ten years, while the job market has expanded by more than 2% just in the past year.

  1. Charlotte, North Carolina

Charlotte has been named the fastest-growing market for tech talent for the second year in a row. The metro area has created more than 45,000 new jobs in the last 365 days, a trend that establishes the city as a leader in American economic growth. Over the previous year, population growth climbed by more than 2.6 percent and job growth by about 3.8 percent.

  1. Denver, Colorado 

Through the pandemic, Denver's direct asking rents for office property remained stable, and the market had its first quarter of positive net absorption since Q4 2019. Denver is home to almost 3 million people in the metro area, and its population climbed by 1.2 percent in 2021 while the job market expanded by 1 percent.

The pandemic and economic recession are still having an impact on several office markets across the nation. Investors in office buildings have started to notice recovery indications as the year comes to a close. 

In contrast to many previous real estate market cycles, the lack of demand rather than an excess of supply is what is causing the current office market to stagnate. Opportunistic investors wanting to purchase office space in 2022 may find good prices in some of the greatest office cities as the economy continues to improve and businesses begin to expand.

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Published in : Commercial Real Estate, Market Studies   By : Rock & DATA   On : August 2, 2022



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