Hybrid work impact on office real estate

The rise of hybrid work models is driving significant changes in office space utilization and the commercial real estate market. Initially, German companies faced challenges in redesigning hybrid workspaces to balance cost reduction with employee needs. Research indicated that many offices lacked sufficient areas for meeting and interaction, prompting a need for data-driven analysis of desk-use patterns to optimize space.

As hybrid work became more widespread, with approximately 80 percent of organizations expected to use such models by 2026, the impact expanded to broader real estate trends. Global office occupancy rates have declined, and in Europe, vacancy rates rose significantly compared to pre-pandemic levels. This has led to a trend of converting office buildings into residential spaces, such as the transformation of the Telekom Tower in Konstanz.

By the end of 2025, European office vacancy rates reached approximately 9.5 percent, up from roughly 6 percent prior to the pandemic. Studies commissioned by the European Commission have deemed the conversion of surplus office buildings into residential properties to be technically and economically viable.

In the German market, the shift has resulted in continued price adjustments. While premium, ESG-compliant properties remain highly valued, the Victor Prime Office index showed a 3 percent decline in the second quarter of 2026 for top-tier locations including Berlin, Düsseldorf, Frankfurt, Hamburg, and Munich. This downturn is attributed to rising yields within a relatively inactive investment market.