With regard to the situation, developers and investors must adapt to different conditions than has been the case so far. The changes do not primarily concern the amount of rent. A much more significant factor is and will be the shortening or flexibility of leases and the possible reduction of leased space in direct proportion to the share of people working in the home office.
BNP experts, who have addressed hundreds of key managers, predict only a temporary, and consequently slight, increase in vacancy. In 2020, the vacancy rate increased year on year in almost all European markets, mainly due to the completion of speculative construction and the vacancy of older office space.
"The office market is capable of relatively quick corrections. In order to avoid a significant oversupply and impact on revenues, developers are abandoning speculative construction and re-evaluating the use of their office projects. In Prague, we are already witnessing this, ”explains Kamila Breen, Head of Market Research at the Prague branch of BNP Paribas Real Estate.
The authors of the European Property Market / Outlook H1 2021 study link the revival of the office market with the share of the vaccinated in the company. With the higher resilience of the population, demand will "thaw" and tenants will begin to respond to changes in the environment.
"We expect that activity will increase in the second half of this year. After the audit of the needs of their teams, some of the tenants will solve the situation in the existing premises, but some will go elsewhere. We observe that due to market uncertainty, landlords are already offering more flexible rental conditions. This trend will continue in 2021 and possibly even longer, "believes Lena Popova, head of the BNP Paribas Real Estate office rental department.
Her European colleagues anticipate the most lively increase in interest in new offices in the largest French cities, London, but also in the German cities of Stuttgart and Frankfurt. Rising unemployment and the economic condition of companies will play a major role in the rental activity. Unemployment has risen in most European markets. However, some markets were less affected, depending on the economic measures in place to support employment.
At the same time, however, the study points out that developers and owners will keep the tenant under more pressure, even at the cost of various reliefs or benefits. The freed spaces will be more difficult to occupy than before the outbreak of the pandemic. The sensitive issue of operating costs will reappear, which will be as important for the tenant as the rent itself. Economical offices will have an advantage.
"None of the factors described will affect rent fluctuations. The current stable level of rents in demanded Class A buildings, which we recorded in 2020 in most European cities, expects a gradual growth until 2025, "says Lena Popova, based on the predictions of his colleagues. He points out, however, that the ups and downs fluctuate are and - unless an unexpected external influence is reached - they remain really minimal, around 1-1.5%.
Source: // Retrend