Office to Residential - 'Recovery Actions' as Complementary Measures

• In Frankfurt am Main, office space vacancies have again exceeded the 1-million-square-meter threshold, and the vacancy rate is approaching double digits by mid-year, while there is virtually no vacancy in the housing market. Many other cities face similar situations. The concern of many office property owners about repurposing their properties for ‘original’ 1) residential use ("Once residential, always residential") is understandable. However, if the alternative is permanent vacancy, other options must be considered.
• With "working in the office stock," Frankfurt market participants, in particular, have extensive experience: In the last 15 years, almost 3 million square meters of office space have been temporarily or permanently withdrawn from the market. The majority of the permanent removals were due to conversions to residential use (both residential and commercial). From 2005 to 2022, around 13,000 residential units were created in Frankfurt alone through the conversion of former commercial use, averaging more than 700 per year. This also included the creation of affordable housing (e.g., in the Lyoner Quartier). In many other cases, the focus was more on the higher-priced housing segment.
• Frankfurt is not a universal blueprint for other markets - the projects are naturally highly individual. However...
  • The long-standing experiences of all involved (with various locations, framework conditions, profitability, etc.),
  • The sometimes large dimensions of the projects,
  • As well as the ability to monitor success with this multitude of measures,
    ... can be a valuable resource for other projects. The advantages of repurposing include sustainable use of spaces, avoidance of new land sealing, often the creation of additional (e.g., gastronomic or local amenities) infrastructure, and upgrading the surrounding area, which ultimately benefits all types of use in the area.
• "Recovery Actions": Additionally, between 2005 and 2022, almost 3,600 residential units were returned to the Frankfurt housing market by ending their illegal use (such as vacation rentals). In Munich, almost the same volume was achieved within the last 10 years: by ending misappropriation, around 3,400 residential units were returned to their original use. In 2023 alone, nearly 500 units in Munich were reclaimed - thus, an area of 28,000 m² can be returned to the housing market. For Berlin2), figures are only available since 2016: Since then, nearly 27,000 residential units have been reclaimed from misappropriation for the housing market - less than the number of residential units needed annually in the capital in the coming years3). Given the total housing stock - more than 400,000 residential units in Frankfurt, more than 800,000 in Munich, and more than 2 million in Berlin - these measures may seem like a drop in the bucket. Therefore, it is all the more important to remove the brakes on housing construction in Germany.

1) In contrast to more flexibly managed commercial residential use, such as serviced apartments.
2) In Düsseldorf, figures have been recorded since 2020, with around 350 residential units reclaimed since then (out of a stock of around 370,000 residential units). In Hamburg – depending on the definition – it has been 6.100 in the latest available 10-year period up to 2021. (total stock of around 1 m residential units).
3) IW Köln Report "More Housing Shortage Due to Increasing Demand and Declining Construction Activity," June 2024.

Sources: City of Frankfurt, City of München, State of Berlin, City of Düsseldorf, City of Hamburg.