Office rental levels are ultimately a product of the balance between occupational demand and office supply in a market, according to UBS. In the first edition of this series, the research team discussed some of the inevitable challenges COVID-19 will place on the demand side. In this second paper, they examine the current situation and future supply of office space in Europe, and how COVID-19 may impact the balance between supply and demand, and rental growth prospects, over the coming years.
Limited current and future supply levels will limit the decline in prime office rents in the short term. But the economic challenges are likely to lead to headcount reductions, with corporates vacating unutilized space. This trend could be accelerated, if corporates adopt higher levels of flexible working in a post-COVID-19 world.
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