Office real estate: better placed now than in the credit crisis
The first quarter saw a decline in activity in the user market, primarily as a result of a lack in good-quality office space available. The impact of the coronavirus is also influencing this market: companies are putting searches on hold and rent payments are being suspended. April of this year saw a lower proportion of rents paid than the same month last year, down to 72% compared to 83%. Based on this, we expect to see a weak second quarter.
Vacancy rates less affected than in 2008
In determining the impact on vacancy rates, several key issues play a role:
- We started the previous crisis with a vacancy rate of around 8%. The current position is relatively favourable, with less than 4% vacancy in Amsterdam.
- We expect the short- to medium-term impact of the crisis to have a less significant effect on the office market than the financial crisis.
- There is only a limited volume of development plans in progress that have not been pre-let. In Amsterdam, only 2.7% of total stocks will be completed in 2020 and 2021, and the percentage is lower for the other cities.
Difficult period for flexible offices
In the short term, the flexible offices sector will continue to face difficulties. However, this does not mean that the sector should be written-off. Expectations are that companies will take a close look at their office portfolios and take account in their decision-making of the workplace of the future, focusing on flexibility, quality and sustainability. Providing that the economy reopens (either partially or fully), the flexible office sector will also recover.
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The office market is in a better position than before the financial crisis. The current vacancy rate is low and the number of development plans in progress that have not been pre-let is limited