Work from home may be behind falling office prices

The transaction price for offices has been falling for a year. It is the first time since 2015 that offices sold for less for four quarters in a row, Statistics Netherlands (CBS) reported on Tuesday. Chief economist Peter Hein van Mulligen thinks that the continuing work-from-home trend may be behind this development.

Office prices were 2.1 percent lower in the first quarter of 2024 than in the same quarter last year. The number of office buildings has also been decreasing for years, as they get demolished or turned into homes. The Netherlands currently counts around 94,000 offices, down from 97,500 in 2015. Demand for office space is declining, while the service sector continues to grow. “I don’t know whether this means the end of the office building,” Van Mulligen said.

The sales prices for rental homes have also not increased for two consecutive quarters, CBS said. These prices have been leveling off since the first quarter of 2022 and have now reached a plateau. The Affordable Rent Act, with which the government wants to regulate mid-level rentals, is likely partly to blame for this. The bill that was recently approved by parliament makes rental properties less profitable and, therefore, less attractive to investors. “That will also depress the value of rental properties,” Van Mulligen said.

Retail properties were 4.8 percent more expensive in the first quarter of 2024 than a year earlier, while industrial properties increased by 5.1 percent. Industrial properties include distribution centers, warehouses, and other properties intended for the commercial processing and storage of goods. Prices for industrial properties have been on an upward trend since the first quarter of 2015, but the size of the year-on-year increase has been declining for eight quarters in a row.