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Conversion of offices into residential properties – solution for the real estate market?
Empty offices in major German cities: Why conversion into apartments fails due to bureaucracy - Find out more in this current economic report.
Conversion of offices into residential properties – solution for the real estate market?
The German real estate market is going through a phase of change, particularly in the area of commercial real estate. Statistics from the Association of German Pfandbrief Banks show that prices for commercial real estate fell by 12.1 percent between the fourth quarter of 2022 and the fourth quarter of 2023. This development contrasts with residential property prices, which have only fallen by 6.1 percent. Experts are predicting a less severe decline in commercial real estate prices this year compared to the previous year. Nevertheless, a price recovery is not expected to occur before the end of the year.
The idea of converting unused office space into residential property seems like an obvious solution to help both commercial property owners and home seekers. However, Michael Ammann from the Rhenish Craft Housing Association warns that the bureaucratic hurdles in Germany represent significant obstacles. A conversion project in Cologne city center led by Ammann demonstrates this problem - the process dragged on over six years, mainly due to lengthy approval procedures and official requirements.
Converting offices into living spaces is not only time-consuming but also expensive. According to Ammann, the costs for such a redesign are comparable to a new building on a greenfield site. The required expertise of specialized craftsmen and adjustments to living space standards drive up costs. In comparison to the USA, where more apartments are being built from former office buildings, innovative approaches are difficult to implement in Germany due to stricter regulations.
Despite these challenges, there is tentative progress, for example in Lower Saxony, where the building regulations are to be changed to facilitate the process of converting offices into apartments. Simplifying approval procedures and adapting more flexibly to existing structures could help convert more office space into living space. A study by real estate specialist Jones Lang LaSalle (JLL) shows the potential for almost 20,000 additional apartments by 2025 in Germany's seven metropolises, which could be created from vacant office space. This could make a significant contribution to meeting the need for housing in urban centers.