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Knowledge of cultural peculiarities, sustainability requirements and local differences down to micro-markets now determine whether office space can be successfully let around the world.

“The current prices do not reflect the considerable differences within the sector, which are likely to increase,” Claudia Reich Floyd is convinced. The portfolio manager for global exchange-traded property stocks (REITs) and head of the German office of Hazelview Investments explains in a recent commentary how these three key differentiators make themselves felt and what investors should look out for in the international office segment.

Cultural differences lead to different levels of office utilisation

In Germany for example, according to various sources, over two thirds (68%) of firms and their management expect employees to return to the office from working from home – one of the highest figures in an international comparison (see infographic). This figure is slightly lower in Japan (62%). However, residential spaces are also relatively smaller there and a disciplined work culture is more pronounced.

“Employees often prefer well-equipped office environments that promote productivity and collaboration,” says Reich Floyd. “This is a trend that REIT investors should consider when evaluating properties in this region.”

Employees make demands for return to the office

Increased amenities, flexible working environments and better health and safety measures are a particular focus for workers in the US, where office vacancy rates are now at historic highs. “Investing in high-quality green buildings with better air quality, natural lighting and wellness facilities will help employees’ health focus post-pandemic,” says Reich Floyd.

However, the approach to incentivising employees to return to the office varies greatly from region to region. In Asia, for example, the integration of smart technologies to monitor and improve air quality, energy consumption and occupancy levels are becoming standard.

Sustainably managed offices get tenants sooner and achieve higher rents

Companies are increasingly focussing on their environmental footprint and opting more often for “green offices”. According to the Hazelview expert, independent sustainability labels are playing a more important role: “Green office buildings that boast certifications such as LEED or BREEAM not only reduce operating costs through greater energy efficiency. They are also in line with the company’s sustainability goals.”

Certified green offices also achieve higher rents and record lower vacancy rates than traditional workplaces. In the US, the rent difference in prime locations is up to 31%, in Singapore and Bangkok up to 15%. In London, the proportion of vacant offices in the West End, which has once again become more attractive, is only 5.5%, whereas it has risen to over 17% in Canary Wharf, according to the portfolio manager.

Hazelview Investments is an active investor, owner and manager of global property assets dedicated to creating value for people and places. Hazelview employs a global investment and asset management team of more than 90 people across its offices in Toronto, New York, Hong Kong and Hamburg and has CAD 12.2 billion (approximately EUR 8.3 billion as of 31 December 2023) of real estate assets under management. Further information can be found on the website: www.hazelview.com.