Over 170 million m2 of office space in 16 major European cities—six times the size of Central London's office stock—are at risk of obsolescence by 2030.
According to Cushman & Wakefield's new report, "Rethinking European Offices 2030," this risk stems from impending climate legislation, shifting workplace strategies, and increasing economic pressures.
Seven major Western European cities face a significant challenge, with almost 80% of their office space at risk of obsolescence. Milan has the highest percentage of at-risk office space (86%), followed closely by Barcelona and Stockholm (both at 81%).
Office vacancy rates are significantly higher (up to 550 basis points higher) in non-central locations compared to city centres. This highlights a widening gap between prime, well-located office buildings and those in less desirable areas, the latter being far more vulnerable to obsolescence and financial risk.
High-demand central business districts (CBDs) should prioritize renovations to maintain premium rents. Conversely, less desirable, higher-vacancy areas outside the CBD will likely benefit more from repurposing existing buildings into alternative uses.
In contrast, Eastern European cities like Budapest, Prague, and Warsaw show a much lower risk (43%), reflecting newer construction over the past two decades, unlike their Western counterparts where less than 20% of the stock was built in that timeframe.
While currently lower, Eastern European landlords will increasingly face similar obsolescence challenges as their buildings age. The risk isn't uniform across Western Europe; cities like Munich, Dublin, Lisbon, and Berlin have lower risk (60-65%) due to a larger proportion of newer buildings constructed in the last two decades.
Although Berlin and Munich have a lower percentage of at-risk office space, the sheer volume is substantial. Given their relatively newer buildings, upgrading existing structures through minor renovations, depending on location and amenities, might be the most effective solution.
London's office market faces a significant challenge: 76% of its stock is projected to be obsolete by 2030. Stricter regulations, coupled with a strengthening economy, are speeding up upgrades and redevelopments. Landlords are proactively modernizing buildings to meet both regulatory requirements and increasing tenant demands as leases expire.
Dr. Nigel Almond, head of EMEA Office Research at Cushman & Wakefield, said: ‘The real estate sector is responsible for around 40% of all greenhouse gas emissions, with investors and developers working hard to significantly reduce the impact development has on the environment. Occupiers are increasingly focused on well-located, amenity-rich buildings that help them achieve their corporate ESG goals and attract top talent. We see a greater opportunity to reposition office assets to meet these expectations in central locations where vacancy is typically lower and assets are holding their value better than those further afield. Ultimately, a range of financial factors will impact decision-making and influence the future of this stock.’
Emma Swinnerton, head of Rethinking EMEA at Cushman & Wakefield, added: ‘Investors need to carefully consider the factors at play as they seek value from real estate transactions in the next decade. Equally, occupiers need to understand how these trends impact their choice of location. We anticipate a growing divide between best-in-class centrally located assets and those in peripheral locations where vacancy risk is often greater.’
