Working from home prevalent across Northern Europe, but has no effect on productivity

A new research briefing from Oxford Economics claims to highlight the sustained prevalence of working from home in Europe, particularly in northern cities, and examines its impact on office real estate markets. According to the briefing, which analyses data through 2023, working from home has become a permanent feature of the European workforce, with notable variations across different regions and cities.

The report finds that northern European countries, including the UK, Netherlands, and the Nordics, have the highest shares of employees working from home. Cities like London, Stockholm, and Amsterdam reported the largest percentages of residents engaging in homeworking, with figures reaching as high as 59 percent in London. Conversely, cities with strong manufacturing or hospitality sectors, such as Athens and Milan, exhibited much lower rates of homeworking.

According to the briefing, the rise of hybrid work models has significantly affected office real estate markets across Europe. With fewer workers commuting daily to office spaces, demand for office space has declined, vacancy rates have increased, and the value of office properties has dropped. However, the report notes that this trend is not uniform across all cities. For instance, Madrid and Bucharest, which have lower rates of homeworking, are expected to see stronger demand for office space due to forecasted growth in office-based employment.

Interestingly, the briefing points out a growing divergence in office demand between central and peripheral areas. Central locations, particularly those offering modern, energy-efficient buildings that comply with environmental, social, and governance (ESG) standards, are witnessing robust demand. These high-quality, centrally located offices are becoming increasingly desirable as companies seek to provide attractive work environments for their employees.

Despite the profound impact on office demand, the report finds no significant correlation between the rise in working from home and changes in productivity across major European cities. This suggests that while working from home may not hinder productivity, it is reshaping the physical footprint of workspaces.

The report concludes that as working from home remains entrenched, particularly in northern European cities, its impact on office real estate continues to evolve. While overall demand for office space may be muted, prime locations and modern buildings are bucking the trend, highlighting the ongoing shift in how and where people work in Europe.