Berlin. After the start of the Ukrainian war, Deutsche Bank closed its technology centers in Saint Petersburg and Moscow. This meant that she was faced with a logistical challenge: hundreds of specialists were to relocate to the German capital and needed office space. Instead of renting new space, those responsible made a rather unusual decision.
For a long time, conversions of occupied areas were considered an emergency solution; owners only modernized vacant properties. But that has changed: “Conversions based on occupancy are becoming more and more the norm,” says Karim El-Ishmawi, head of the Kinzo architectural firm, which was responsible for the Deutsche Bank project.
“The time is now right to negotiate the extension of existing rental agreements,” says Jan-Niklas Rotberg, Germany head of office leasing at the brokerage house Savills. The office market is under pressure in many places.
Since the coronavirus pandemic, demand for new office space has fallen by around a third, explains Miguel Rodriguez Thielen, head of office leasing at JLL. Because of the political lockdown regulations, companies made it possible to work from home. Since then, full office presence has not returned.
According to the real estate service provider, the average vacancy rate in the seven German cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart has increased from 5.5 to 8.5 percent since 2023. “Landlords of older existing properties in particular are coming under massive pressure,” says Rodriguez Thielen.
In order to keep their tenants with good credit ratings from evicting premises, owners - especially away from prime locations - are increasingly involved in modernizing their properties, report the office experts. Because high-quality spaces are more competitive. "Hybrid working and the increasing use of video conferencing have changed the role of the office. Above all, it should promote interaction between people and offer a higher quality of stay," says Rodriguez Thielen. At the same time, office modernization offers many companies the opportunity to use space more efficiently and to downsize.
How high the incentives – called “incentives” in industry jargon – depend on the location and condition of the property. According to real estate expert Rotberg's experience, five to 20 percent of the contract value can be achieved. Mirko Czybik, head of rental management at CBRE in Germany, reports something similar: “In our practice, overall packages for a five-year term in very good locations are a maximum of five to ten percent.” In locations with higher vacancies such as Frankfurt's City-West, around 15 to 20 percent of the agreed basic rent is realistic.
Rotberg advises negotiating, in addition to construction cost subsidies, the waiver of dismantling obligations: "We're talking about a lot of money that the tenant has to set aside. If he can resolve this provision, it's worth a lot." The same applies to exit and rental rights, with which companies can react flexibly to changing space requirements.
A case from Düsseldorf supported by JLL shows what an overall package of incentives to stay can look like: A German industrial company examined the move out for months, but after negotiations remained in the portfolio. It was allowed to give up a fifth of the area early and was given the option to reduce its size further if necessary. The owner is also modernizing the rental space and investing in the sustainability of the building, including new charging stations for electric cars. In addition, he grants the tenant a rent-free period and subsidies for interior work, the equivalent of which amounted to almost 13 percent of the contract value.
In the past, conversions of rented space often failed because companies had to rent external alternative space during the construction period. Today, the low office occupancy in many places creates a buffer in the building. According to the “Office Report 2026” published in October, for which the real estate service provider Pro M² evaluated data from 164 organizations in German-speaking countries with around 225,300 employees, an average of 62 percent of jobs are occupied. On weak days, occupancy is only 34 percent. According to the report, 194 million square meters of office space could be saved nationwide or freed up for other uses.
During modernization, these hardly occupied areas can be used to continue to operate buildings. While some of the workforce works from home, the rest use internal buffer spaces, so-called “swing spaces”. In the Deutsche Bank high-rise in Berlin, Kinzo initially converted a disused cafeteria on the eighth floor into office space. The construction site then moved floor by floor: the affected teams moved into alternative quarters for a few weeks while craftsmen uncovered ceilings, modernized the building services and redesigned the room layout.
However, modernization during ongoing operations poses hurdles. “The planning is much more complex,” says architect El-Ishmawi. Ultimately, the disruption to employees in the building must be kept as low as possible.
Noisy work therefore usually takes place in the late afternoon and evening hours, when the office is hardly occupied. At the same time, the parts of the building used must be continuously supplied with electricity and water. Sensitive office areas need protection from access by strangers, for example through a security concept with separate access routes for construction workers.
According to El-Ishmawi, the extent to which the special requirements for phased construction increase the construction time and costs depends on the size of the alternative areas and the number of construction phases: “The smaller the parts, the more expensive it becomes because the trades are tied up for longer.”
Last but not least, communication with employees determines success: “The elevator is covered, construction workers run into each other, there is noise - this is a difficult time for those affected,” says El-Ishmawi. In order to avoid frustration, employees and their wishes must be involved from the start.
But even with good planning, building without moving out has its limits. “A comprehensive transformation of office space is generally only possible if the users clear the affected areas at least temporarily,” emphasizes Alexander Knälmann, managing director of the construction service provider Apoprojekt, which specializes in existing buildings.
According to Knälmann, existing conversions have so far been implemented primarily by location-based owner-occupiers - such as large corporations - because of their complexity. However, that could change in the future: "The pipeline of new project developments and revitalizations is currently running virtually empty. Office users will therefore more often rely on an optimized portfolio with modernization during ongoing operations in the future," says JLL manager Thielen.
