Amount of empty office space to reach record levels this year

print this

During the latest upswing an enormous amount of office space was constructed in the Helsinki area, and more is to come. This year another 70,000 square metres of office space is still to be added, followed by another 70,000 square metres in 2010.
      Already there is a clear surplus of office space in the capital area. At the end of last year more than nine per cent of the Greater Helsinki region’s offices were unoccupied. This translates to 765,000 square metres.
     
Consulting agency Catella, which is looking into the office space situation, predicts that during this year the amount of empty office space will reach a million square-metres, or 12 per cent of all office space in the capital area. This is more than during the recession years of the 1990s.
      “This always happens. The development peaks during the upswing when construction is most expensive and most of the buildings are completed promptly for the next recession. During the recession nobody builds anything, even though that is when it would be most profitable. People never seem to learn this”, says Catella managing director Michael Schönach.
     
In Schönach’s opinion what is particularly worrying is that the underutilisation rate of buildings in the Greater Helsinki area - even before the current downturn - was higher than before the 1990s recession.
      For the past five years the underutilisation rate has lingered around eight per cent (see graph).
      The situation is ideal when the rate is six per cent. In such a case there is enough office space available for any firm looking to add more space.
      Likewise, owners of properties can effortlessly find tenants.
     
Apart from half-empty newly-built office buildings, what adds to the problem is that many older properties become tenantless.
      For example in Helsinki’s Vallila district an entire office building is becoming vacant as teleoperator TeliaSonera downsizes. In the Pitäjänmäki district there are several old office buildings standing completely empty.
      “Finding new tenants for these buildings may prove a real task”, Schönach says.
     
The amount of empty office space will also affect the rental price development. The increase in rents has already levelled off and Catella predicts that a decline is on the way.
      The rental prices of old premises will come down first, but also newly-built office space will soon be available at knock-down rates.
     
Construction company NCC is currently erecting a third office building to accompany the previous two in a business park in Espoo’s Otaniemi. No rental agreements have so far been signed for the third building.
      “Several negotiations are currently under way, but during the recession businesses leave the decision-making to the very last minute, because even they do not always know what will happen to the firm”, says NCC unit director Hannu Havanka.


Previously in HS International Edition:
  Many new luxury apartments in Helsinki still unsold (7.1.2008)
  Sharp decline in output in November (9.2.2009)

Helsingin Sanomat