A new report, Rethinking European Offices: Turning Obsolescence into Opportunity, by Cushman & Wakefield has revealed that over 70% of office buildings in Western Europe could become functionally, financially, or legally obsolete by 2030.
The warning comes amidst intensifying sustainability regulations, evolving workplace strategies, and mounting economic pressures, urging property owners and investors to act swiftly to safeguard the value of their assets.
Key to the growing obsolescence risk is the Energy Performance of Buildings Directive, set to take effect in 2024. This regulation requires all office buildings to achieve nearly zero emissions by 2030. Non-compliance could result in significant penalties, making sustainability upgrades essential for landlords.
The study highlights a striking disparity between Eastern and Western European office markets. In Eastern European cities like Warsaw, Prague, and Budapest, only 43% of office stock faces obsolescence. However, in Western hubs such as London, Paris, and Madrid, over 70% of office buildings are at risk due to their age and outdated standards.
Centrally located office spaces are significantly less vulnerable compared to peripheral locations, where vacancy rates are up to 550 basis points higher. This highlights the importance of location in mitigating financial risks and maintaining asset value.
The report underscores the potential of repositioning and repurposing to enhance asset value. For instance, Torre Pujades in Barcelona was renovated into a sustainable multi-tenant office space, improving its market appeal. Similarly, a London business park was successfully converted into a mixed-use healthcare facility, unlocking new revenue streams.
