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CBRE expects to see a decline in demand for office accommodation

A decline of 8.7% in the five major cities through 2030

November 1, 2023

A modern home office environment. A person sits on a white chair of unique contemporary design, with a curved backrest. The person is wearing a short mustard yellow top and three-quarter length pants. The person sits with his back to the camera, facing a large, sleek computer screen. The desk is made of light-colored wood and has a minimalist design with no visible drawers or compartments. It stands on two A-frame legs also made of the same light wood. On the desk are some neatly arranged items: on the left side of the monitor is a small potted plant with green leaves. On the left side of the desk is a wooden shelf that matches the aesthetic of the desk. On it are various items such as books, decorative objects and another potted plant. Leaning against this shelf is a yellow bicycle, which adds a touch of color that matches the person's top and contributes to the room's vibrant yet harmonious color scheme. The bike's design is modern, with thin tires and a sleek frame. The floor is made of light wood, in keeping with the furniture. The person is wearing white slippers, casually placed next to the chair on the floor, indicating a relaxed home environment.

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Irene Martini

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It is now three years since Dutch office workers were forced to work from home because of the COVID-19 pandemic. Although office workers in the Netherlands are still working from home 65% more than they were in 2019, employees and employers alike have yet to strike the right balance when it comes to hybrid working. The impact of hybrid working on office space will only be fully visible in a decade, with a projected 8.7% decline in demand for office space. These are the main conclusions reached by international real estate advisor CBRE in its latest research on the subject of hybrid working.

Home and office working yet to reach a balance

Hybrid working is leading to a recalibration of office accommodation needs in an effort to enable efficient and effective work. Figures published by the Dutch Ministry of Infrastructure and Water Management show that the proportion of people working from home has fallen again slightly since October 2020. Until last year, many people were still working from home for an average of four or five days a week, whereas this figure is now 1.3 days. This shows that employees and employers are still attempting to strike the right balance between working from home and at the office. The differences in office attendance levels are making it difficult for employers to predict future accommodation needs.

Impact of hybrid working fully tangible only in the long term

Companies are adapting their accommodation strategies in line with the new way of working, but it is interesting to note that the current vacancy rates in the offices market show virtually no increase, despite the rise in hybrid working over the last three or four years. Indeed, there has actually been a slight decline in the vacancy rate in most regions. This is in marked contrast to the situation in the rest of Europe or the United States, where the vacancy rate has increased significantly. It can largely be explained by the desk-per-employee ratio, which was significantly higher in these countries before the pandemic than it was in the Netherlands. This has been 65% in the Netherlands for years, compared to 82% in the United States. We expect to see the international desk-per-employee ratio settle at around 54% (see Figure 1).

Figure 1 : Expected trend in desk-per-employee ratio (now versus two years ahead)

This graphic shows information on the workplace per employee ratio in different regions. The chart shows the percentages for the United States, Europe and Western Europe for the year 2023. It also shows the forecast for the workplace per employee ratio.

Nevertheless, we expect to see a long-term decline in office space per employee as hybrid working becomes increasingly widely integrated. Demand for offices in the G5 will decline by 8.7% by 2030. This will ultimately result in a peak in the vacancy rate of 10.7% by 2027/2028 compared to the current average rate in the G5 of 5.5%.

Increasing polarisation in the offices market: flexibility and ESG essential

The preference of tenants for multimodal offices is expected to bring about a polarisation in the offices market. Tenants prefer central, multimodal offices, where flexibility and ESG are prioritised. The shortage of offices of this kind is leading to higher rents than the existing stocks that lack these characteristics. This difference in rents is expected to increase further, primarily because the demand for net zero offices, driven by companies’ ESG ambitions, is rising considerably faster than supply.

This trend is creating challenges for owners and policymakers alike. Policymakers will need to offer more space for new offices at central locations while also attempting to prevent additional vacancy at secondary locations by means of transformations. This will compel owners to engage in more active asset management and increase their investments in ESG and flexibility. Our research shows that demand for flexible office space is set to increase by around 55% in the next two years as efforts are made to accommodate peak occupancy. Owners will need to capitalise on this by providing tenants with flexible solutions.

Sebastiaan van Nimwegen, Senior Director Capital Markets at CBRE, responds: “Our research shows that the impact of hybrid working is manageable for the Dutch market. This is especially the case if we compare it to other countries, where vacancy has already increased significantly. Moreover, the fact that a great deal of office accommodation has been given a new life in the residential and hotel markets in the past is a testament to the flexibility of the Dutch offices market. We expect to see a further wave of transformations in the next decade – albeit significantly smaller – that will completely rebalance the offices market, while ensuring that the operational risk for office investors remains low.”

Read full details of the CBRE research on the impact of hybrid working here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2024 revenue). The company has more than 140,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

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