Vienna Office Market: Cautiously Optimistic
There are increasing signs of a slight recovery of the Vienna office market. Nearly 30,596 square meters of office space were rented out on the entire office market in the second quarter, according to the quality standards of the Vienna Research Forum (modern offices built/generally renovated since 1990 with certain quality criteria). Although this is the lowest value of the last four years in the same period, it is an increase compared to the months of January to March 2020. This is because the rental capacity was only 12,977 square metres in the first quarter of 2020 – a decrease of around 65 per cent compared to the same period in 2019. “In view of this, I am very satisfied with the positive momentum since the beginning of June. The office market made it through almost unscathed”, says Steven Bill Scheffler, office rental team leader at OTTO Immobilien.
Corona not entirely to blame
It might be reasonable to assume that the low rental performance can be traced back to the initial restrictions in recent months or potential economic consequences for companies. But there is much more to it than that, says Scheffler.
In fact, the below-average completion rate for new office space in 2019 had already had a huge impact on the first quarter of this year. Around 256,000 square metres came onto the market in 2018, while the previous year’s figure was only around 36,000 square metres. This is why the low vacancy rate of just under four per cent will continue to be felt in the coming weeks and months.
A lot in the pipelines
But the bad patch did not last long. The experts at OTTO Immobilien expect a completion volume of 155,000 square metres already this year. And there is a lot in the project pipelines for 2021, with 137,000 square metres.
Scheffler is taking a “cautiously optimistic” view of the next few months. The general mood on the market is positive. “Many companies have been actively searching for office space again for the past several weeks”, says Scheffler. The pharmaceutical industry in particular is currently looking for new space, as well as telecommunications, IT and infrastructure companies.
Given the risk of infection, the focus is not so much on open-plan offices but rather on smaller rooms. This also means that the booming co-working trend from recent years is coming under pressure. “People will need to stop working in close quarters and spread out more in order to comply with social distancing regulations”, says Scheffler. He adds that classic business centres are in a better position to offer closed rooms. Another advantage they have is flexible terms. “This is why the demand for business centres is going up at the moment”, explains Scheffler.
New way of working: Multi-purpose offices give way to work zones and lounges in the future
Scheffler does not believe that the demand for office space is declining with the rise of home offices and teleworking. “The office will continue to have a reason for being. But it will redefine itself”, he says, referring to the different ways the office is used as a place of work. “Until now, the office has served as a site for all kinds of activities”, says Scheffler. As such, the workplace has been a space for efficient and focused work, strategic discussions with colleagues and a breeding ground for innovation and creativity – ideally all at the same table. But because so many people have had positive experiences working from home, and with social distancing rules still in place, a new way of working could emerge in which the workplace moves away from its multi-purpose character towards more process-based work. “People would then choose where to work depending on the task at hand”, explains Scheffler. This means not only moving between the office and home but also within the office itself. “Instead of the current all-in-one workplaces, there could be zones for focussed work, similar to a quiet coach on a train, and work lounges that also allow informal discussions or telephone calls”, says Scheffler.
Now that home offices have been tested, Scheffler also sees another opportunity: “For instance, if an office space is not available on time, a company could also order its employee to work from home for a few weeks. This would have been unthinkable in the past. Now it has become an acceptable project management tool”, says Scheffler.
Focus on health
For tenants and their employees, health considerations go beyond how workplaces are arranged and set up. There is now growing interest in features such as contactless access systems and ventilation systems that help reduce exposure to airborne viruses.
Brokers relying more on innovative tools
But technology has also advanced for the brokers themselves as video tours, virtual tours and digital staging have become firmly established in recent weeks and months.