Around 64% of office buildings in Greater Lisbon are at risk of becoming obsolete by 2030. This is what Cushman & Wakefield's ‘Rethinking European Offices 2030’ report points out.
This risk is linked to a number of factors, including climate legislation, which is on the rise. Many assets in several major cities in Western Europe will face these challenges over the next five years.
This study analyses the age of the office stock in 16 major European cities and the opportunities for owners to reposition or convert their spaces. By 2030, the consultancy estimates that more than 170 million square metres of office space, built before 2004 and without significant interventions since then, will be at risk of obsolescence in these cities.
The percentage of office stock at risk is highest in Milan (86 per cent), Barcelona and Stockholm (81 per cent), Paris (80 per cent), Madrid and Amsterdam (77 per cent) and London (76 per cent). In Munich (60 per cent), Dublin (64 per cent), Lisbon (64 per cent) and Berlin (65 per cent) the stock presents relatively lower risks, ‘reflecting a relatively higher proportion of parkland developed in recent decades’.
In Eastern Europe (Budapest, Prague and Warsaw), on the other hand, the share of office stock at risk is lower, with an average of just 43 per cent, which means that a large part of the built heritage in this region was built in the last two decades, in contrast to the Western markets, where less than a fifth of the stock was developed during this period, explains C&W.
In Greater Lisbon, it is estimated that by 2030, 2.86 million square metres of office space will be at risk of becoming obsolete. And the report shows that the CBD (zone 2) and the New Office Zones (zone 3) are under the most pressure, followed by the Prime CBD (zone 1). In addition, increased demand for higher quality office buildings continues to drive development activity. Future supply under construction currently stands at 234,400 sqm, with a further 195,000 sqm due to be completed by 2028. Overall, this means that over the next four years there will be 429,000 sqm of new office space entering the market.
Pedro Salema Garção, Head of Offices at Cushman & Wakefield in Portugal, explains that ‘the influx of new projects represents an increased risk for older office buildings, which may struggle to compete. The strong demand for the best spaces and the prime rents that these spaces can achieve are key factors contributing to this trend.’
He adds that ‘prime rents have reached their highest levels in 30 years, while the vacancy rate has been gradually increasing, currently standing at 7.2 per cent. As more leases are renewed and companies reassess their needs, we will continue to see changes throughout this decade and beyond, many of which are already being felt today.’
Isabel Simões Correia, Rethinking Portugal Lead, Head of Business Development, adds that ‘repositioning is probably the best solution for city centre locations. When it comes to redevelopment, hotels and housing tend to be the predominant alternative uses in these areas. As we move from central to peripheral locations, the range of alternative uses increases, including in areas such as healthcare, medical facilities, laboratory space or data centres, depending on local dynamics. The lower rental values of offices compared to these options and the higher vacancy rates may make the conversion of assets in these locations the winning strategy.’
Nevertheless, the report also highlights that Europe is relatively well placed to effectively manage risks through changing occupational demand, with the vacancy rate in the monitored cities increasing to a lesser degree than in other cities and regions around the world.
