There is some light at the end of the corona tunnel, and the market of office premises that has been slower than usual in the past year shows some signs of activation.
There have been many discussions on how the need of companies for office premises will change as a result of the corona crisis – both for economic reasons and due to a change in habits. Will the office buildings remain empty because companies want to give up large offices and will reduced demand cause a drop in the lease prices?
The need for new office premises will not disappear
A year in the pace set by the virus has passed and now we can safely say that lease prices have not considerably dropped nor will that happen in the future. It is true that in some cases lease discounts have been provided but those are mainly need-based when the business of the tenant has really been greatly influenced by the crisis, and by joint efforts people try to survive the difficult period. Lease agreements concluded in the so-called corona year include somewhat more flexibility than before, and it shall probably continue to be that way for a while, at least until the normal pattern of life is restored.
However, looking at the economic situation, I cannot see a reason for a reduced need for offices. The corona crisis has mainly brought down the sectors that do not use large office premises anyway – the biggest sufferers are the accommodation and catering sectors. On the other hand, a number of IT companies and companies in other sectors have grown and are planning to continue active recruitment also in the coming years.
The predicted 2.5% economic growth in this year and more rapid growth in the next years give a reason to predict that already in the next months more and more companies are starting to look for new offices. Only slightly over 30,000 m2 of new office premises will enter the market this year but next year the figure will be at least twice as much. Additional vacancies will develop also in the existing high-quality buildings that are in great demand.
That means there is enough choice that in turn feeds demand. Companies have always been interested in new modern buildings, and the bigger the competition in the labour market (also here many sectors have not been impacted by the corona crisis at all, on the contrary), the more companies want to improve their working environment. It is also not of little importance that a well ventilated spacious office is safer for the health of people.
Increasing vacancies are expected in older buildings, however, for the better our companies are doing, the lower is demand for outdated office premises.
Home office is rather for variety
I do not believe that the need for office premises will drop due to the popularity of home office. There are certainly professions and types of people who prefer home office, but the majority of us still need professional contact with colleagues and team feeling in order to remain productive and inspired.
People forced into home offices for many months admit that if a year ago working at home was regarded as a benefit and additional bonus, now working in the office has become a privilege. People appreciate flexible work organisation where it is possible to divide time between home and office, working at home a few days a week if they so desire. The demand for co-working (shared office) premises has also recovered, which is a sign that people want a change from working at home.
Thus, there is no reason to expect massive reduction of office premises and the triumph of home office.
A drop in the lease prices is not expected
To sum up, it may be said that it is probably the best time to choose new premises for companies who wish to move into a new office within the next couple of years. Once the corona crisis is over, many companies who suspended their search for office will become active.
There will be no such grabbing on the market of offices like we can see now on the market of residential premises, as there is sufficient offering. However, considering how many people have postponed leasing of new premises, an increased demand can definitely be expected.
Unless all the developers simultaneously start building new offices, we will not see a drop in the lease prices. However, in the current calm market situation, people who negotiate lease agreements are definitely in a somewhat better position.
