According to the property consultancy JLL*, around 8.5 million square metres of office space is vacant across Germany’s seven largest office markets. Given the housing shortage, converting this space into residential accommodation seems an obvious solution. However, the actual potential is considerably lower than the vacancy figures suggest. According to calculations by the ifo Institute, only around 30 per cent of vacant office space is technically and, under planning law, suitable for residential use. And even of this space, only a small proportion can be converted in a way that makes economic sense. This is highlighted in a recent analysis by Brandenburg.Legal, a law firm specialising in property law.
“In Germany, we have too many vacant offices and too few flats at the same time. However, to conclude from this that one problem can be solved by the other is too simplistic. There are considerable structural, economic and legal hurdles standing between theoretical potential and housing that can actually be built,” said Dr Christoph Brandenburg of Brandenburg.Legal.
Munich highlights the gap between potential and reality
A recent study by Colliers** on the Munich office market highlights the extent of the differences between theoretical potential and projects that can be realised in the short term. Whilst the current Lord Mayor, during his election campaign, assumed there was potential for at least 10,000 flats through the conversion of office space, Colliers estimates that around 1,200 flats can be realised in the short term. The starting point is around 1.54 million square metres of vacant office space. After assessing criteria such as the land-use plan, development plan, residential location, year of construction and occupancy rates, only around 60,000 square metres remain that are suitable for conversion in the short term. Although a significantly larger potential of around 545,000 square metres has also been identified, realising this potential is considerably more complex. “These figures are not contradictory. Rather, they show that we must distinguish between theoretical possibilities and projects that can actually be implemented. Anyone who bases their argument solely on high potential figures raises expectations that, under the existing conditions, often cannot be met,” said Brandenburg.
Four key obstacles
According to Brandenburg.Legal, there are four main obstacles to the successful conversion of office space into flats:
Buildings: Many office properties are not structurally designed for residential use. Large building depths make it difficult to achieve sufficient natural lighting. Added to this are the layout of the service cores, the building services infrastructure and the requirements for sound insulation and fire safety. The necessary alterations to the building structure can be so extensive that conversion is no longer economically viable. In such cases, demolition followed by new construction may be the better alternative.
Location: Not every office location is equally suitable for residential use. Larger office complexes, in particular, are often situated in industrial estates or in areas with heavy traffic. In addition to the question of whether such developments are permitted under planning law, there is therefore also the question of whether attractive residential accommodation can be created there in the long term.
Profitability: In addition to high conversion costs, tax implications can have a significant impact on the financial calculations. When converting a commercial property that was previously let subject to VAT into residential accommodation let exempt from VAT, the right to deduct input VAT may be lost. Under certain circumstances, there is also a risk of input VAT adjustments. This can significantly reduce the profitability of a project. This is another reason why alternative uses, such as certain forms of short-term accommodation, may be more financially attractive for owners.
Law: Residential use is not permitted under planning law at every office location. According to the Colliers study, 75 per cent of Munich’s office vacancy is in areas with a legally binding local development plan, often with provisions for commercial use. Only 11 per cent is located in areas already designated for residential use in the land-use plan. If further areas are to be used for residential purposes, amendments to planning legislation, exemptions or other planning instruments may be required.
A construction push alone will not solve the problem
With the ‘Construction Turbo’, the legislator has created additional opportunities to facilitate housing construction projects more quickly and to make it easier to deviate from existing planning law. In Brandenburg.Legal’s view, this can also help with the conversion of office properties. However, this instrument does not replace an assessment of structural suitability or a sound profitability analysis. Furthermore, the involvement of local authorities remains crucial. “The ‘Bau-Turbo’ can streamline procedures, but it does not transform unsuitable office buildings into suitable residential properties. Nor does it relieve local authorities of the responsibility to decide which uses they wish to permit at which locations,” explains Brandenburg.
What is needed is not new advisory services, but faster decision-making
Against this backdrop, Brandenburg.Legal takes a critical view of the debate surrounding local authority advisory and refurbishment agencies. Whilst identifying suitable properties is certainly a sensible step, the actual obstacles often lie elsewhere.
“Property owners and project developers are generally able to assess for themselves whether a different use of their property is financially viable. What they cannot secure on their own, however, are the necessary planning permission and official approvals. That is why, above all, we need faster procedures, reliable decisions and a planning process that actually enables sensible changes of use,” says Brandenburg.
The conversion of vacant office buildings could help to create additional housing, but it is not a universal solution to the housing shortage. What is crucial is a nuanced assessment of the building stock. Rather than publicising the highest possible theoretical figures for housing, greater attention must be paid to identifying which projects can actually be implemented under realistic technical, fiscal, economic and legal conditions. “The crucial question is not how many flats could theoretically be accommodated in vacant offices. What matters is how many of them can actually be built. This is the yardstick by which a successful conversion policy must be measured,” Brandenburg concluded.
Further information: https://brandenburg.legal/analysen/buero-zu-wohnen/
* JLL: Big 7 Office Market Report, second quarter 2026
** https://www.colliers.com/de-de/research/konversionspotential-muenchen
