Hardly any other asset class has lost as much favor with investors as the office segment. Weak economy, geopolitical crises and changed working environments are the main reasons. The result: restrained rental turnover and increased vacancies. Nevertheless, a distinction should be made as to which offices meet the requirements of users and investors in the long term: Buildings with good transport connections and a good energy balance (ESG-compliant), New Work-capable floor plans and attractive infrastructure in and around the building increase employee loyalty, promote higher return-to-office rates and promote recruiting success.
Even and especially in B locations, properties with these attributes can occupy a sustainably dominant market position, while at the same time less competition compared to A locations. Here, too, rising rents for high-quality products are possible, but still at a distance from prime rents in the CBD. Let’s be honest: Prime rents of 40 – 60 euros/m² are affordable for very few industries or companies. While most tenants don’t skimp on quality, they do have a more limited budget.
Due to lower purchase prices, lower interest rates on debt capital and comparatively little competition on the investor side, there are currently very good entry opportunities if the products are analysed both macroeconomically and sub-market-specific. But where there are opportunities, risks are not far away: Owners who are not willing or able to implement the “flight to quality” in their properties that are no longer in line with the market and are at risk of stranding will have to rely on other solutions in this irreversible trend. Conversions or sales will be the consequence and will continue the transformation of the office markets.
More on this in the current Aengevelt quarterlies.
