Working from Home Reduces Office Space in German Companies

Some German companies are downsizing their office space due to working from home, as new results from the ifo Business Survey show. “6.2% of all companies have already downsized their office space. A further 8.3% plan to do so in the next five years,” says ifo researcher Simon Krause. “This trend is especially evident among service providers and large companies, which use the majority of their office space. One in four of these companies has reduced its office space or is planning to do so.”

The proportion of people working from home in Germany has been stable for almost two years at a quarter of the employees and two thirds of the companies. “Despite calls from individual companies to return to the office, regular working from home has become established, which is why companies are gradually adjusting their office space requirements. Since leases are often concluded on a long-term basis, the overall effect will only be felt over time. Based on our studies, we expect the demand for office space to fall by around 12% in the long term due to working from home,” says Krause.

Service providers and large companies are the most likely to consider reducing their office space. 11.8% of large service companies have already downsized, and 14.0% plan to do so within the next five years. There is less office downsizing in manufacturing (5.6% completed, 6.8% planned), trade (1.7% completed, 4.5% planned), construction (0.2% completed, 1.6% planned), and among small companies (4.2% completed, 6.1% planned). “Reducing office space poses challenges for the tense real estate market,” says Krause. “In combination with economic uncertainties, higher interest rates and construction costs, no quick recovery is in sight.”

Expanding office space due to working from home, on the other hand, is rare. Only 0.5% of companies have increased their office space to date, and 2.5% plan to do so in the future. The remaining companies have not yet made any changes to their office space and have no plans to do so in the future.