Average office occupancy rates across eight major European markets have risen in the last six months from 55% to 57%, says Savills, however on Tuesdays and Wednesdays the average is 64% and 62% respectively, closer to the pre-pandemic rate of circa. 70%.
Madrid, at 65%, has the highest average occupancy rate of the cities the international real estate advisor studied, overtaking Paris, which at 62% is now recording the same occupancy rate as London’s West End. The latter has seen the biggest jump in occupancy levels of the cities examined: in the last six months rates have risen from 50% to 62%. This is partly due to activity amongst finance companies, says Savills: when examined alone, occupiers in Central London’s financial sector (excluding insurance) are recording a 63% average occupancy rate, due to the sector largely favouring a four-days-a-week in the office model. As many organisations in the private equity and investment management space favour West End locations, this has contributed to the district’s rapid increase in occupancy. Warsaw has also seen occupancy notably increase from 46% to 55% since February, reflecting more demand for CBD locations.
Karol Grejbus, Associate Director, Office Agency Tenant Representation at Savills, comments: ”The hybrid work model remains the leading approach for the Warsaw office market, and all indications are that it will stay with us for the long term. However, it’s important to note the significant discrepancy between organizational preferences and employee expectations, which leads to the continuous evolution of the work model in many companies. Tenants undoubtedly strive for even greater cost optimization, and firms opting for relocation often choose to reduce their occupied space in exchange for a higher standard in centrally located offices.”
Chart 1: Average European occupancy rates
The international real estate advisor says that given the average occupancy levels on Tuesdays and Wednesdays are now approaching close to ‘normal’ levels of around 70%, this is a signal to occupiers to be cautious when planning their office strategies as they need to have enough space is to accommodate peak worker occupancy, even if on other days levels are lower.
Chart 2: Average daily occupancy rates
Rebecca Webb, Director of EMEA Cross-Border Tenant Advisory at Savills, comments: “Our latest data indicates that average occupancy rates have increased across all weekdays in key European cities, but it’s important to look at the peak days given it’s the occupancy levels on these that determines the minimum amount of office space an occupier needs. What is key is how the space is designed to meet the diverse needs of employees, ensuring that they have alternate work settings within the office to suit various tasks throughout the day. This therefore places greater importance on the shared spaces of the office which employees are expecting much more from for greater productivity. Demand continues to intensify for well-connected, good-quality office space in mixed-use locations, and amid construction delays and a shortage of prime stock, occupiers will have to compete for the best space, supporting prime rental growth.”
Mike Barnes, Associate Director in Savills European commercial research team, adds: ”Looking forward, we expect average European office occupancy rates will begin to stabilise around the 60% mark, as companies and employees find an equilibrium that works for them, although this will vary between cities and sectors. The European cities that are showing a pattern of high occupancy – namely Madrid and Paris – are supported by a high proportion of city centre living, good transport infrastructure and lower public transport costs.”