Construction Volume in the Office Sector: Number of New Office Buildings Declined Significantly in 2022

The office real estate landscape appears increasingly altered after a boom phase, driven by the ongoing trend towards home office work and a mood of crisis in the construction industry. It is becoming apparent that the completion of new office buildings in Germany is noticeably decreasing. According to a report by the Federal Statistical Office, a total of 1,563 office and administrative buildings were completed in 2022, which is 13.6 percent less than in the pre-crisis year of 2019. Compared to the year 2002, this even represents a decline of 46 percent. Since the beginning of the records, only the figures for the year 2010, with 1,533 completed office buildings, stand out more negatively. In addition, the growth in new office space has reduced by a good 43 percent compared to the last twenty years. The number of building permits for office and administrative buildings continued this negative trend. Statisticians recorded that 16.6 percent fewer building permits were issued last year than in the previous year. This suggests a continuation of the decline in the construction of new office buildings. The shift in work culture towards more home-based work leads to an oversupply of office space, resulting in vacancies. In addition to the resulting disinterest of investors in acquiring such buildings, the increased interest rates and material costs also contribute to the dampening of new construction, even though the rise in construction prices has somewhat flattened in 2023. The crisis in the commercial real estate sector not only affects the balance sheets of banks worldwide but also impacts domestic financiers such as Deutsche Pfandbriefbank and Aareal Bank. A similar picture emerges for commercial buildings, whose completion numbers also significantly decreased. This is impacted by the boom in online trade. In 2022, only 887 new commercial buildings were created, which, compared to 2019, represents a decline of more than a quarter. Accordingly, the commercial area also fell by almost 33 percent to 1.47 million square meters. The retail sector is thus also in a critical phase of adjustment.