Almost 2bn sq ft of European offices at risk of obsolescence

More than 1.8bn sq ft of office stock across Europe is at risk of becoming obsolete by 2030. That is the finding of the latest Rethinking European Offices 2030 report from Cushman & Wakefield. The report looks at office stock across 16 key European cities to see how much is at risk of obsolescence. The figure, some 1.8bn sq ft, is the equivalent of more than six times the total office stock in central London. Western European markets were found to face a greater obsolescence challenge, with almost 80% of total stock at risk across seven major cities. Cushman said this reflected the relatively older assets in those areas. Milan had the highest proportion of offices at risk at 86%, followed by Barcelona and Stockholm, both at 81%, and Paris at 80%. Eastern European markets (Budapest, Prague and Warsaw) were found to have a lower volume and share of stock at risk, averaging 43%. However, much of the built environment in this region has been delivered over the past couple of decades, in contrast to Western markets where less than a fifth of stock was developed in this period. Nonetheless, Cushman said these challenges would rise up the agenda for Eastern European landlords as stock ages over the coming years. In London, Cushman’s analysis suggests the level of stock that is obsolete will reach 76% by the turn of the decade. However, with regulation already in place providing for more stringent ratings, this should accelerate the pace of change, especially with an improving economic landscape. Nigel Almond, head of EMEA office research at Cushman & Wakefield, said: “Across Europe there is continued strong demand for offices, but tightening sustainability regulations, shifting workplace strategies, and economic pressures mean property owners and investors must act now to prevent their assets from losing value. We will see continued changes over the remainder of this decade and beyond with three main factors – carbon, community and cost – driving the direction of obsolescence.” Emma Swinnerton, head of rethinking EMEA at Cushman & Wakefield, added: “Investors need to carefully consider the factors at play as they seek value from real estate transactions in the next decade. Equally, occupiers need to understand how these trends impact their choice of location. We anticipate a growing divide between best-in-class centrally located assets and those in peripheral locations where vacancy risk is often greater. “Landlords need to understand their assets, and the context in which they exist, to determine whether repositioning or repurposing is the best strategic approach. Clear, flexible, and efficient planning policies at a local or national level will be critical for developers in being able to move schemes forward. Tax breaks, reduced targets or other incentives may be required to help ensure schemes are brought forward, enabling governments to meet targets and avoid assets falling into disrepair.”