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A Resilient Office Real Estate Market Despite Unprecedented Shocks


Since the beginning of the Covid-19 crisis, not only has office real estate faced unfamiliar challenges in terms of a building’s function and its relationship with the workspace but also market equilibrium.

A strong foundation

First of all, rentals in the main European hubs are going to experience a sharp decline in 2020, taking into account the lockdown but also the health and economic incertitude which is causing many people to hold back on making decisions.

Nonetheless, rental values can, to a certain extent, weather a temporary fall in demand as the market is under-supplied as a general rule, particularly in the main business districts. As for the investment market, it has been experiencing instability with high price levels. Regardless, the returns on real estate are still very attractive when compared to other bonds, which is unprecedented in the wake of an economic downturn. Thereby, returns and prices should not fluctuate much in comparison with previous crises, notably in regards to “premium” assets in particular in areas where hazards are well-compensated.

A Better Breakdown of Rental Values

In contrast, rental values have not been representative of the buildings’ quality or location for several years. Also, independent of the risk the returns had the tendency of converging.

From now on, the value of office assets should be better broken down according to their profiles, both by the rental prices and by the returns. The economic downturn will trigger a resurgence of a better restructuration of rental value.

Moving Towards a Different Kind of Office

It is clear that Covid-19 has impacted building function as well as the working methods during but also subsequent to the lockdown period. Some already existing trends in the recent past could accelerate, others could evolve, notably in the location of spaces or the organisation of work. Nonetheless,the office building will continue to occupy an important place in supporting companies and its resources in their quest for enhanced performance and well-being. 

European Office Market Key Figures

The total lockdown of Europe has resulted in the shutting down of the markets. Consequently, office demand and investment volumes will fall significantly this year. However, thanks to the market fundamentals being strong before the outbreak of the pandemic – low vacancy, rising rental values, the fall of the market will be limited and able to recover.

-1% to -3%

The impact of the Covid-19 crisis on prime rental values in Europe should remain extremely modest as a decrease between 1-3% is expected on average. CBDs will remain the most sought-after district and prime offices the most appealing assets for office occupiers.

+90 bps

The increase in office vacancy will also remain limited. As such, an average +90 bps is expected in the 13 main markets in Europe. However, the vacancy rate has fallen continuously since 2009, reaching its lowest point at the end of 2019. Consequently, no oversupply situation is expected in Europe.


The demand for offices is likely to significantly decrease in 2020, particularly in Q2 and Q3. The overall takeup in Europe will fall 41% compared to 2019.

However, we are expecting the recovery of the market to begin at the end of 2020 and carry on into 2021.

€160 bn

We foresee the commercial real estate investment volumes in Europe reaching €160bn for 2020, a drop of -45% over one year despite a record Q1. Volumes are likely to remain two times higher than during the 2009 global financial crisis.