Given the tight housing supply in many regions, the conversion of office space into residential accommodation is becoming increasingly important in Germany. With the “Commercial to Residential” funding programme initiated by Federal Minister for Building Verena Hubertz, policymakers now aim to provide stronger support, as reported last week by DIE ZEIT and HANDELSBLATT, among others. The new funding sends a positive signal to the strained housing market. “With our new ‘Commercial to Residential’ funding programme, we are giving unused office and commercial properties a second chance,” Verena Hubertz is quoted as saying at the launch of the programme.
The scheme addresses to structural changes in the office market. Due to remote work and flexible working models, demand for traditional office space is falling in many cities, whilst the need for housing remains high. With the “Commercial to Residential” programme, the federal government aims to make investment in the conversion of these spaces more economically attractive. A total of €300 million has been allocated for 2026 alone. In addition to financial grants of up to 30,000 euros per newly created flat, the programme also includes streamlined approval procedures and closer integration with existing urban development funding schemes.
The significance of this measure becomes particularly clear when considering the potential within the existing building stock: according to JLL, by the end of 2025 a total of around 8.1 million square metres of office space was vacant across Germany’s seven largest cities, whilst at the same time there is an acute housing shortage in metropolitan areas such as Berlin. Even though Berlin itself has a comparatively low office vacancy rate of 8.2 per cent, this highlights the imbalance between a shortage of housing and underutilised space in other sectors, such as office property.
However, the Federal Ministry for Housing, Urban Development and Construction (BMWSB) does not provide a precise figure for how many flats could actually be created through conversions. JLL estimates around 11,000 homes, whilst the ifo Institute puts the figure at 60,000. Given the scale of the housing shortage, the potential remains limited. Nevertheless, particularly against the backdrop of the recent sharp rise in rents and the extremely low vacancy rate, any additional expansion of supply remains a key factor in easing pressure on the market.
In the long term, this support could therefore make a meaningful structural contribution on stabilising the housing market, as it combines several objectives: the more effective use of existing space, the revitalisation of inner-city areas, and the creation of additional housing.
“Targeted support for the conversion of office space into housing is an important and necessary step towards creating additional housing capacity,” says Jacopo Mingazzini, CEO of The Grounds. “In Berlin in particular, we see great potential in the existing building stock. Nevertheless, subsidising individual measures does not solve our fundamental problem, namely the overregulation of the housing market. What is needed is a reduction in bureaucracy and regulatory burdens in order to stimulate more private-sector investment in housing construction once again.”
