The global office space usage has been decreasing due to the growing popularity of hybrid work models and remote work, leading to a surplus of unused space. Post-pandemic, demand for offices shrank further as many people continued to work from home or use a combination of in-office and remote arrangements. In many key cities, inflated living costs persuaded white-collar employees to move to areas with cheaper housing but longer commutes, making working from the office less attractive.
JLL’s property consultancy report predicts subdued leasing activity in 2024 due to an expected global economic slowdown. Office vacancies are likely to continue increasing due to tenants downsizing while upgrading to new office space with better locations and higher quality. CBRE projections suggest that demand for office space is expected to slightly improve in 2024, particularly in the second half of the year, but will remain below pre-pandemic levels.
Leasing volumes in Europe are expected to increase by 10% but will continue to remain below average as lower-quality space suffers higher vacancy rates and faster obsolescence. Asia-Pacific office markets are expected to experience similar trends, with only 13 of the 25 major Asia-Pacific office markets tracking by CBRE recording prime rent growth year-over-year in 2023’s Q3.
The uncertain outlook for office space demand has impacted the long-term plans of commercial real estate developers and investors. The global office buildings market is projected to grow from $581 billion in 2023 to $592 billion in 2024, an annual growth rate of 1.9%. However, the future of office building demand remains murky, with the growing need for apartments and data centers providing developers with an opportunity to convert office space into other types of properties.
Source: Construct Connect
