Approximately one-quarter of substantial corporations contemplates reducing their workforce.
More and more corporations are shifting towards remote work, leading to a substantial decrease in office space demands. According to research from the Ifo Institute in Munich, approximately 6.2% of companies have already reduced their office space, with an additional 8.3% planning to do so within the next five years. This trend is particularly prevalent among service providers and large corporations that occupy majority of office spaces. In fact, one out of four of these companies have either reduced or plan to reduce their office space.
The percentage of individuals working from home in Germany has remained consistent at around a quarter of employees and two-thirds of companies for nearly two years. "Regular work from home has become the norm," explained Ifo researcher Simon Krause. "Companies have accordingly adapted their office space requirements." However, the full impact on the real estate market may not be felt immediately as many lease agreements span long-term periods. "Based on our studies, we anticipate a decrease of about 12% in long-term demand for office space due to remote work," said Krause.
Service providers and large companies were the most likely to consider reducing their office space requirements. 11.8% of large service providers have already made reductions, with 14.0% planning to do so within the next five years. In contrast, less office space is being reduced in industries such as manufacturing (5.6% completed, 6.8% planned), retail (1.7% completed, 4.5% planned), construction (0.2% completed, 1.6% planned), and small businesses (4.2% completed, 6.1% planned).
The decrease in office space poses challenges for the already tight real estate market, according to Krause. "In addition to economic uncertainties and rising interest rates and construction costs, there's no sign of a quick recovery," he stated.
The shift towards remote work by corporations has significantly impacted the office space market, leading to reduced demands. According to the Ifo Institute's research, this trend is particularly noticeable in service providers and large companies, with a projected 12% decrease in long-term demand for office space due to remote work.
