CBRE expects to see an 8.7% decline in demand for office accommodation in the five major Dutch cities by 2030

It is now three years since Dutch office workers were forced to work from home because of the COVID-19 pandemic. Although office workers in the Netherlands are still working from home 65% more than they were in 2019, employees and employers alike have yet to strike the right balance when it comes to hybrid working. The impact of hybrid working on office space will only be fully visible in a decade, with a projected 8.7% decline in demand for office space. These are the main conclusions reached by international real estate advisor CBRE in its latest research on the subject of hybrid working.

Home and office working yet to reach a balance
Hybrid working is leading to a recalibration of office accommodation needs in an effort to enable efficient and effective work. Figures published by the Dutch Ministry of Infrastructure and Water Management show that the proportion of people working from home has fallen again slightly since October 2020. Until last year, many people were still working from home for an average of four or five days a week, whereas this figure is now 1.3 days. This shows that employees and employers are still attempting to strike the right balance between working from home and at the office. The differences in office attendance levels are making it difficult for employers to predict future accommodation needs.

Impact of hybrid working fully tangible only in the long term
Companies are adapting their accommodation strategies in line with the new way of working, but it is interesting to note that the current vacancy rates in the offices market show virtually no increase, despite the rise in hybrid working over the last three or four years. Indeed, there has actually been a slight decline in the vacancy rate in most regions. This is in marked contrast to the situation in the rest of Europe or the United States, where the vacancy rate has increased significantly. It can largely be explained by the desk-per-employee ratio, which was significantly higher in these countries before the pandemic than it was in the Netherlands. This has been 65% in the Netherlands for years, compared to 82% in the United States. We expect to see the international desk-per-employee ratio settle at around 54% (see Figure 1).

Figure 1 : Expected trend in desk-per-employee ratio (now versus two years ahead)

Nevertheless, we expect to see a long-term decline in office space per employee as hybrid working becomes increasingly widely integrated. Demand for offices in the G5 will decline by 8.7% by 2030. This will ultimately result in a peak in the vacancy rate of 10.7% by 2027/2028 compared to the current average rate in the G5 of 5.5%.

Increasing polarisation in the offices market: flexibility and ESG essential
The preference of tenants for multimodal offices is expected to bring about a polarisation in the offices market. Tenants prefer central, multimodal offices, where flexibility and ESG are prioritised. The shortage of offices of this kind is leading to higher rents than the existing stocks that lack these characteristics. This difference in rents is expected to increase further, primarily because the demand for net zero offices, driven by companies’ ESG ambitions, is rising considerably faster than supply. 

This trend is creating challenges for owners and policymakers alike. Policymakers will need to offer more space for new offices at central locations while also attempting to prevent additional vacancy at secondary locations by means of transformations. This will compel owners to engage in more active asset management and increase their investments in ESG and flexibility. Our research shows that demand for flexible office space is set to increase by around 55% in the next two years as efforts are made to accommodate peak occupancy. Owners will need to capitalise on this by providing tenants with flexible solutions. 

Sebastiaan van Nimwegen, Senior Director Capital Markets at CBRE, responds: “Our research shows that the impact of hybrid working is manageable for the Dutch market. This is especially the case if we compare it to other countries, where vacancy has already increased significantly. Moreover, the fact that a great deal of office accommodation has been given a new life in the residential and hotel markets in the past is a testament to the flexibility of the Dutch offices market. We expect to see a further wave of transformations in the next decade – albeit significantly smaller – that will completely rebalance the offices market, while ensuring that the operational risk for office investors remains low.” 

Read full details of the CBRE research here.