MAP Market Insight
There is a considerable supply gap on the German housing market. The problem of the shortage of suitable housing will not be solved in the foreseeable future, as new construction activity is far from sufficient.
The main obstacles to easing the situation at present are high interest rates and construction price inflation. In addition, suitable plots of land for new buildings are in short supply, especially in the attractive major cities. At the same time, numerous office properties are vacant, meaning that their conversion to residential use has been the subject of intense debate for some time. The pandemic, which has prompted many companies to plan for a reduction in office space in the future, has given the topic new momentum. In addition, many investors are focusing less on new construction projects and more on optimizing their existing portfolios.
Conversions are also likely to become more important in the future because embodied emissions, i.e. the emissions tied up in real estate, are increasingly coming into focus. The recent addition to the EU taxonomy sends a clear signal here, as we explained in our Market Insight on embodied emissions.
In this Market Insight, we investigate the question of whether office conversions can be a viable way to create economically affordable living space. We analyze the risks and contrast them with the opportunities and explain the circumstances under which such projects promise good prospects.
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