Europe is set to see a 20% drop in demand for office space over the next few decades, a new research report issued by Colliers International predicts.

Europe is witnessing a shrinking working population, creating a base case scenario of a 10% reduction in demand for commercial (office and industrial) space across Europe over the next 20 years. This will be followed by a further 10% decline over the subsequent 20 years to 2050.

Today, the 'baby boom' generation dominates the workforce (at almost 45% of the working population) and the demands of this group have most influenced planning of office environments to date, resulting in a high proportion of cellular office use as opposed to full open plan. By 2020 the influence of the baby boomers will have waned as it is effectively halved and by 2030 baby boomers will be virtually non-existent within the workforce. This will leave Generation Y and Z to dominate the workforce with greater involvement in decisions regarding the format and design of the workplace.

Office buildings typically have a 20 year life-cycle and long-term investments are funded over a 20-year term. For banks and investors, it will be vital to ensure that their office buildings are future-proofed as much as possible to meet these changing demand patterns, Colliers said. Failure to do so could mean higher vacancy, increased obsolescence (resulting in a requirement for higher levels of capital expenditure to upgrade stock) and lower rents, resulting in a weaker exit yield and reduced returns.

While these European-wide trends affect everyone, the national and local impact on employment and real estate markets can and will differ strikingly. On the face of it, eastern, southern and western European office markets will feel the brunt of a reduction in the workforce, and thus the demand for office space, while northern Europe will maintain marginal growth.