Working from Home Could Reduce Office Space Requirements in Germany by 12%

Working from home reduces the need for office space in Germany. This is the result of a new study conducted by the ifo Institute together with real estate consultancy Colliers for the major cities of Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart, and Düsseldorf. “Regular working from home has become the new normal for around 25% of employees and 69% of companies. This is leading to a decline in demand for office space, particularly among large companies and in industries where working from home is more commonplace. By 2030, it’s likely that the need for office space will have decreased by 12%. This would correspond to a drop in demand of around 11.5 million square meters in the seven major cities. The new world of work is triggering structural change in the office market,” says ifo researcher Simon Krause, coauthor of the study.

Although companies are bringing their employees back to the office, the proportion of people working from home in Germany has remained stable for almost two years. “Many companies have opted for fixed days for office work to promote personal collaboration, with staff working from home on the other days. The future belongs to this form of work, because it’s highly accepted by employers and employees alike and it enables the necessary productivity,” Krause says.

At the same time, sales volumes on the office rental market in 2023 sank to a level last seen during the acute phase of the coronavirus crisis. “The office market in Germany is traditionally closely linked to the ifo Business Climate Index. “There are currently no signs of a rapid recovery,” says Andreas Trumpp of Colliers, coauthor of the study. The vacancy rate rose from under 3% in 2019 to over 6%, and the proportion of subleases from under 2% before the pandemic to almost 8%. Office leases in Germany have an average term of around seven years, which is why the aftereffects of the pandemic are becoming apparent only after a delay. “Modern office space in good locations that meet the new requirements are experiencing high demand and seeing rent increases. There’s less demand for older spaces that can’t accommodate the new world of work,” Trumpp says. The study also shows that there is only limited scope to convert offices into urgently needed living space.

This study is the first to combine data from the ifo Institute’s working-from-home surveys of 9,000 companies with anonymized Colliers data on office leases between 2013 and 2023. Colliers provided this data to the ifo Institute free of charge for this project.