OVERSUPPLY OF OFFICES IN MALMÖ?The construction rate of office premises in Malmö has been at an all time high for a long time. During the same period, record levels of both office rents and yields have been observed. The question that constantly is being asked is how much office space the rental market in Malmö will manage? Well, pretty much if you look at the growth in office intense enterprises.
The completion of large and well situated office projects have succeeded each other during the last 5 -7 years. Most of the projects have been fully or almost fully let to high rents. The leases is usually contracted with an initial rental discounts, which is not as extensively mentioned.
While the new office premises are filled with tenants, the old office stock has generally been suffering with increasing vacancies and only a very modest rental growth. The occupancy rate for older buildings in Malmö CBD is however not a significant problem today. How is that possible with the current high development rate? Croisette have analysed this by doing research and compiling the development of headcounts in office intense enterprises, including e.g. accounting, finance, insurance and public administration. The development in those enterprises have been compared to the growth of office spaces during the same period of time.
Approximately 180 000 m2 of office space were completed in Malmö during 2008 – 2014, which corresponds to approximately 9 000 workplaces. During the same period office intense enterprises have grown by 6 800 jobs. The relationship between the development in this two factors is probably one of the explanations to the increasing vacancy rate in the older office stock during this time. Between the years 2015 and 2021 the total growth of workspaces will reach approximately 9 000, through completed or planned projects. During the same period of time, additionally 12 000 jobs in office intense enterprises have been added or are forecasted.
The analysis shows that since 2008 the number of additional or planned workspaces match the actual and forecasted growth in number of jobs in office intense enterprises. The new office premises in Malmö are located in Malmö’s best mirco-location for office, close to train stations in Hyllie or Malmö Centralstation. Future project, with a few exceptions, will be situated in less attractive locations than the recent completed projects, with longer distance to restaurants, service and train stations. In the long term this should implicate a positive development for premises in the older stock that has a better location than the planed office projects.
So the answer to the question if there is an oversupply of office premises in Malmö is: No. And perhaps it is time to make a facelift of the older premises to meet the competition from the new projects.