Berlin real estate : Corona is making 6 million square metres of office space redundant
Not only have employees gotten a taste for working from home, employers are also enjoying how it can affect their bottom line.
BerlinAt Payfit in Kreuzberg, the move doesn't yet feel real. One or two pieces of furniture have already been marked but no moving boxes are piling up on the second floor of the Umspannwerk on Paul-Lincke-Ufer in Kreuzberg, also home to the new Google's Campus.
Payfit, which digitises payroll and human resources for small- and medium-sized companies, should be ready for the move by the end of September – technically just to the same floor next door.
But what sounds minor actually marks a major change coming to Berlin – and global – workplaces. Even though business is robust and new employees are being hired, Payfit is moving to smaller offices.
The company is the German branch of a startup that launched in Paris in 2016. It currently employs about 50 people here, but very few of them actually work in an office. Once Covid-19 hit Berlin, many transferred to workstations in their homes. The Umspannwerk offices quickly seemed deserted.
"We had flexible home office days even before corona," says HR Manager Samira Helbig. Not finding anyone in the office was a completely different experience. "But it went really well."
Payfit has since launched "Work from anywhere" to make work even more flexible.
"Everyone should be able to work where he or she feels most productive and how it best suits their lifestyle," Helbig says, noting that the company can even save money in the process. The company is cutting its 750sqm of office space by just over half. Costs will fall accordingly.
In the current environment, the only surprise is the speed at which Payfit is relocating.
A recent management survey by consultancy KPMG included questions about mobile work opportunities. The result: Seven out of ten respondents expect their companies to need less office space in the future.
The corona crisis is already leaving its mark on commercial Berlin real estate. Between April and June, only slightly more than half as many deals were concluded in the rental business as in the second quarter of the previous year. And the past quarter was the worst in a decade for the Berlin office of US real estate service provider John Lang LaSalle (JLL).
In the first half of the year, about 80,000sqm less office space were leased in Berlin than in the first half of the previous year, a decline of 19 per cent. And though the vacancy rate rose slightly to 1.9 per cent, it's still Germany's lowest.
JLL says prices haven't yet begun to fall. In fact, average rent rose to €26.85 per month and square metre in the last half. At the peak of Berlin's commercial real estate market, €40 was the rule.
"Office properties are and will remain relevant places to work," JLL says.
Is that so?
Sven Wingerter's office is located on the 17th floor of the Europa Center at Breitscheidplatz. Wingerter is head of the consulting firm Eurocres, which is considered a leader in supporting companies with their digital transformation. But he's rarely in his office.
He even arranged a video meeting from his home for the interview, highlighting how the traditional office no longer enjoys the central role it once did.
"During corona, even the last dinosaur among CEOs has understood that effective work does not necessarily require being present," says Wingerter.
The 49-year-old is convinced that corona and compulsory working from home has ushered in a cultural change.
Workplace strategist Wingerter says in the future, people will only come into the office if a certain task requires it: "And it's not the boss who decides, it's everyone for themselves."
At least 30 per cent of the office space in Berlin will disappear.
The classic office will become primarily a place of communication. Work will be performed in satellite offices, including the new addition of home offices. New concepts still need to be developed: Wingerter is thinking of small co-working spaces that could be created in residential areas.
“A revolution is underway,” he says. Real estate brokers, architects and urban planners should also brace for coming upheaval.
Not only are 10-year leases a thing of the past, he also says the transformation will have serious consequences for the commercial real estate market.
"In the medium term, at least 30 per cent of the office space currently available in Berlin will disappear," says Wingerter, claiming it's a conservative forecast.
He's talking about around 6 million square metres or an area twice the size of Tempelhofer Feld. High-end rents of €40 are still out there, but they're no longer realistic.
Office rents, says economic research institute IW in Cologne, have already plummeted by up to 47 per cent.
“It's time to start thinking intelligently about the use of the new vacancies," says Wingerter.