All posts by fletcher@cijeurope.com.

AI Is Reshaping the CFO Office From Reporting Function to Real-Time Business Partner

Artificial intelligence is beginning to alter something more fundamental inside corporate finance than the speed at which invoices are processed or reports are prepared. As companies move from experimenting with individual AI tools towards deploying networks of specialised agents, the finance department itself may be heading towards a different operating model.

That was one of the central conclusions of the AI4 discussion “From Automation to Advantage: AI’s Impact on the Office of the CFO,” where finance and technology executives examined how AI is moving from personal productivity tools into forecasting, accounts payable, analysis, enterprise intelligence and ultimately workforce design.

The discussion included Mayank Sharma, Chief Financial Officer of EnergyX, Yoav Nové, Co-Founder and CEO of Reindeer, and Jonas Melton of RSM, whose work focuses on automation and technology transformation within accounting and finance.

One of the clearest changes described by the panel was not technological but behavioural. Sharma said members of his finance organisation had moved from initial reluctance about AI towards increasingly routine adoption. Some now treat AI almost as another member of the team.

That change in attitude matters because the next phase of AI adoption is likely to involve considerably more than employees occasionally using ChatGPT or an enterprise copilot. Companies are beginning to contemplate finance organisations in which dozens, or eventually hundreds, of agents carry out different functions alongside employees. Those agents could reconcile transactions, process invoices, prepare analysis, retrieve information, monitor exceptions or feed continuously changing financial forecasts.

That creates a management problem that barely existed a few years ago. Someone eventually has to supervise the digital workforce. The panel suggested that organisations may therefore need new functions responsible for selecting, training, monitoring and evaluating AI agents. Responsibility could sit with the CFO, CIO, transformation office or a newly created team, but companies deploying AI at scale will increasingly need someone accountable for its performance.

This would include measuring whether agents are producing sufficient value, whether their decisions remain accurate, how much they cost to operate and where human intervention remains necessary.

For finance executives, one of AI’s biggest effects may ultimately be the disappearance of the traditional reporting delay. Finance departments have historically spent considerable amounts of time assembling information before they can analyse it. A forecast might be updated monthly or quarterly because gathering the underlying numbers and producing commentary takes substantial effort.

AI changes that economics. Sharma described EnergyX moving towards a continuously updated forecasting process in which financial information can be examined at considerably greater detail, including down to individual invoices.

Instead of finance employees spending much of their time producing numbers, automated systems can perform more of the collection and preliminary analysis. Employees can then concentrate on understanding why something is happening and what management should do about it.

That moves finance closer to the point where business decisions are being made rather than explaining their financial consequences several weeks later. The potential advantage is therefore not simply reducing headcount. It is reducing the distance between an event happening inside a company and management understanding its financial implications.

The panel repeatedly cautioned against evaluating every AI project through immediate labour savings. Some finance processes involve relatively small teams. Eliminating several manual tasks may therefore produce only modest direct financial savings when compared with very large customer-service operations or software engineering teams.

The greater advantage could emerge once numerous processes become automated simultaneously. Accounts payable, accounts receivable, reconciliations, tax preparation, procurement information and forecasting can potentially feed a much broader financial intelligence system.

Instead of management receiving information weeks or months after transactions occur, AI agents could process new information continually and alert decision-makers to changes as they develop. That could make forecasting more responsive and potentially allow CFOs to identify deteriorating margins, unexpected spending, collection problems or project overruns earlier.

One of the more practical messages from the panel was that companies risk using AI where ordinary automation would work perfectly well. Melton described situations in which businesses considered introducing generative AI for processes that could be resolved through straightforward integration or robotic process automation.

That distinction could become increasingly important as boards pressure executives to demonstrate an AI strategy. Putting an AI model into a process does not automatically make that process better.

Companies first need to determine whether the underlying workflow makes sense, whether systems should be integrated, whether departments are unnecessarily performing the same task differently and whether conventional automation can solve the problem before adding an intelligent layer.

The most significant discussion concerned employment. Sharma gave an example from his own organisation where an accounts-payable employee left and the company decided not to replace the position because AI agents could handle much of the workload.

Humans remain responsible for supervision and final approval, but the example demonstrates how AI could gradually reduce demand for transaction-heavy finance positions.

That creates a potentially profound structural problem. Traditional accounting organisations resemble pyramids. Large numbers of junior employees perform reconciliations, payments, invoice processing and reporting work before gradually gaining enough experience to become controllers, finance directors and CFOs.

If AI removes much of that entry-level work, companies must develop a different way of training the senior finance professionals of the future.

A controller does not acquire judgement simply by reaching a certain age. Much of that judgement historically came from years spent understanding transactions, reconciliations, exceptions and financial controls.

The industry may therefore need to redesign junior roles rather than simply eliminate them. Future finance employees could spend less time manually processing transactions and considerably more time supervising automated systems, interpreting information, investigating exceptions and advising operating departments.

The result could be a substantially different organisational structure. Instead of large teams performing repetitive processing underneath progressively smaller layers of management, future finance departments could contain fewer people overseeing much larger amounts of automated activity.

Senior professionals may increasingly become orchestrators, deciding what agents should do, checking their performance and intervening where judgement or accountability is required.

At the same time, the boundary between finance professional and technologist may continue to weaken. The panel noted that modern AI tools already allow finance employees with limited traditional programming experience to build dashboards, automate workflows and create relatively sophisticated internal applications.

This may reduce dependence on software engineers for smaller finance projects. The valuable employee of the future could therefore combine accounting knowledge, business judgement and enough technical understanding to design and supervise AI-assisted processes.

Another notable disagreement with conventional transformation thinking concerned data. Companies have spent enormous sums creating data warehouses, standardising records and cleaning historic information in preparation for analytics and machine learning.

Nové argued that businesses should be cautious about turning data preparation into a multi-year prerequisite for AI adoption. Large language models can often be taught more like employees: given instructions, examples and current information, then improved as they encounter new situations.

That does not eliminate the need for reliable information. However, it suggests that companies may be able to introduce useful AI applications without first cleaning every historic record across the organisation.

Other panellists stressed that the difficulty often lies elsewhere. Financial information may be scattered between accounting platforms, procurement tools, payment systems, project-management applications, SharePoint sites and internal documents.

The problem then becomes connectivity rather than simply cleanliness.

Despite considerable enthusiasm for experimentation, the panel drew a sharp distinction between AI at the edge of finance and technology controlling the company’s official books.

CFOs appear much more willing to experiment with AI for analysis, commentary, forecasting and workflow automation than with the systems that record financial transactions.

Enterprise resource planning platforms such as SAP and NetSuite remain deeply embedded because their behaviour, controls, audit processes and limitations are well understood.

For a CFO, software generating a management insight can usually be switched off if it performs badly. Software posting transactions into the general ledger or moving company money carries an entirely different level of risk.

Sharma therefore advocated maintaining a stable financial core while experimenting more aggressively around its edges.

The distinction could become an important feature of enterprise AI architecture: established platforms remain the systems of record while flexible AI systems become the layer through which employees interact with those records and perform work.

The rapid creation of AI-focused financial software companies is presenting CFOs with another decision: wait for established software providers to introduce AI functionality or move faster with younger AI-native vendors.

The panel suggested the answer depends heavily on the risk attached to the particular process.

Young companies may innovate faster, but finance departments also have to consider whether those suppliers will exist several years later, whether their controls are mature and whether auditors and regulators understand their systems.

Melton said some AI-native accounting products remain narrower than established platforms, potentially requiring customers to combine several products to reproduce the functionality of a mature enterprise financial system.

For companies already operating major ERP platforms, AI alone may not provide sufficient justification for replacing them.

The opportunity may be greater among growing middle-market businesses that already need to upgrade their financial systems. Those companies can evaluate AI-native alternatives as part of a transition they would have needed to make anyway.

Despite different perspectives, the speakers ended with broadly similar advice for CFOs.

Melton recommended beginning with the desired business outcome rather than searching for AI use cases simply because other companies have adopted them. Nové argued that companies need someone specifically responsible for AI strategy because the technology and available applications are changing too quickly for ownership to remain informal.

Sharma encouraged finance leaders to begin with relatively small, repetitive processes where the impact can be understood and controlled.

But his final point captured the broader message of the discussion. Organisations should not simply automate work and record the resulting labour savings.

The strategic question is what companies do with the capacity AI releases.

If finance teams use it merely to operate with fewer people, AI will primarily become a cost-reduction programme. If they use it to provide faster forecasts, deeper analysis and greater involvement in commercial decisions, the change could be considerably larger.

The office of the CFO would move from documenting what happened inside a business towards helping determine what happens next.

Source: CIJ.World Research & Analysis Team

Sescom Moves European Headquarters to 1,513 sqm at Gdańsk’s Alchemia

Sescom Group has relocated its main headquarters to 1,513 sqm of office space in the Titanium building at Gdańsk’s Alchemia complex, reinforcing the city’s role as the operational base for the company’s expanding European business.

The technical facility management group has taken the entire 11th floor of Titanium at al. Grunwaldzka 409. The move replaces Sescom’s previous headquarters at Grunwaldzka 82 and brings the company’s central management functions into one of the Tri-City office market’s established business locations. The duration of the lease has not been disclosed.

Titanium forms part of Alchemia II alongside the Ferrum building. The properties are owned by Polski Holding Nieruchomości (PHN), which acquired this part of the Alchemia development from Torus in 2016. Together, Ferrum and Titanium provide more than 25,000 sqm of leasable space and hold LEED Platinum environmental certification.

Cushman & Wakefield was appointed by PHN earlier this year as exclusive leasing agent for the two buildings. No tenant-side adviser has been publicly identified in connection with the Sescom transaction. Reesco acted as general contractor for the fit-out of the new 1,513 sqm headquarters.

The relocation was carried out around the beginning of September, with Sescom employees moving into the new workplace as the company continues to expand its operations outside Poland. Despite that international growth, Gdańsk remains the management centre for the group.

Sescom operates in more than 10 European countries and says it supports more than 15,000 retail properties for over 130 brands. The business combines technical facility management with services covering electrical installations, refrigeration, air conditioning, point-of-sale systems and the relocation and opening of retail locations.

“Sescom powstał w Gdańsku i to właśnie stąd konsekwentnie rozwijamy naszą działalność na europejskich rynkach. Nowa siedziba nie jest dla nas jedynie kolejnym biurem. To centrala Grupy – miejsce, z którego będziemy wyznaczać standardy, podejmować strategiczne decyzje i kierować rozwojem organizacji działającej w ponad 10 krajach. Z 11. piętra Alchemii naprawdę daleko widać horyzont. To dobra perspektywa dla firmy, która ma ambitne plany dalszej ekspansji w Europie,” said Marek Kwiatkowski, CEO of Sescom Group.

Sescom Group currently comprises nine companies and is pursuing growth both through its existing operations and acquisitions. Its European expansion and consolidation strategy is backed by private equity investor Enterprise Investors. The new Gdańsk headquarters is intended to support closer cooperation between the group’s businesses and provide a central location for management teams and meetings with partners from across Europe.

Sescom is also developing multidisciplinary teams in the Tri-City region covering technology, engineering, finance, operations, management and sales. For Gdańsk’s office market, the transaction provides another example of an internationally active Polish company retaining its strategic functions in the city rather than transferring its headquarters to another major business centre.

Alchemia has attracted a mixture of domestic and international occupiers. One of Titanium’s largest tenants is State Street Bank, which previously renewed more than 10,500 sqm in the building, demonstrating the continued importance of larger corporate occupiers to the complex.

Sescom’s 1,513 sqm relocation is smaller in scale but represents a different type of demand for the Tri-City office market: a locally founded company using Gdańsk as the management base for a growing international organisation. With operations extending across more than 10 European markets, the decision to establish the group’s new headquarters at Alchemia underlines Gdańsk’s continuing ability to retain corporate decision-making functions alongside the international business-services operations that account for an important part of the city’s office demand.

France’s Ageing Offices Are Opening the Door to a New Hotel Pipeline

The difficulties facing parts of France’s office market are encouraging property owners to reconsider what some older commercial buildings should become. In locations where offices face persistent vacancy, substantial refurbishment costs or limited investor demand, hotels are increasingly being considered alongside housing and other alternative uses. The opportunity is most apparent in Paris, where strong visitor demand exists alongside a large office market containing buildings that no longer satisfy modern occupier requirements. It is considerably more selective elsewhere in France, but the same investment calculation could eventually apply to individual properties in Lyon, Marseille, Nice and Bordeaux.

This is not evidence of a nationwide conversion boom. Most French offices will remain offices, while many buildings that lose their commercial competitiveness will be unsuitable for hospitality. The emerging opportunity concerns a much narrower category: properties in locations capable of supporting a hotel where retaining the existing office use no longer produces an attractive return.

A current Paris project illustrates how that decision can work. Covivio is transforming a vacant office property on boulevard Raspail into a four-star hotel containing 106 rooms. The redevelopment represents an investment of approximately €50 million, with opening expected in 2029. The property has already secured a long-term operating commitment. More important from a real-estate perspective is the reasoning behind the project. Alternative possibilities were considered for the property before hospitality was selected as the preferred repositioning strategy. It demonstrates that an office building can reach a point where its future value depends less on finding another workplace tenant and more on identifying a different economic purpose for the asset.

Conditions in the wider Paris office market make that question increasingly relevant. Île-de-France entered the second half of 2026 with approximately 6.5 million square metres of immediately available offices. Around 750,000 square metres was taken up during the first six months of the year, below both the previous year and longer-term market levels. The weakness is not evenly distributed. Modern buildings in strong central locations remain capable of attracting occupiers, while older properties requiring substantial investment face much greater challenges. This distinction is increasingly important because environmental performance, workplace quality, accessibility and amenities have become central to corporate property decisions.

For owners of weaker buildings, refurbishment can become expensive. Large amounts of capital may need to be invested simply to return an office to a competitive standard, without any guarantee that future rents will justify the expenditure. At that point, alternative uses become part of the investment calculation. An owner can compare the expected return from refurbishing an office with the economics of converting it into housing, hospitality, student accommodation or another specialist property type. The answer depends on the building, its location, acquisition value, planning position and the amount of construction work required.

Hotels can become particularly interesting in central Paris because the city combines enormous visitor demand with limited opportunities to create new accommodation in prime locations. Suitable development land is scarce, while planning and construction can be complicated and expensive. Existing commercial buildings can therefore provide another route into the market. Paris has already demonstrated that office-to-hotel transformation is physically achievable, with commercial properties converted while retaining significant portions of their existing structures. Such projects can preserve buildings that might otherwise require extensive demolition and reconstruction, although the financial and environmental advantages depend heavily on the individual property.

The biggest obstacle is often the building itself. Offices and hotels require fundamentally different internal arrangements. Hotel bedrooms normally need windows and efficient access to corridors, while very deep office floors can leave internal areas that are difficult to use productively. Columns, ceiling heights and façade design can further restrict the number and size of rooms that can be created. Hotels also need appropriate lifts, staircases, fire-safety systems, kitchens, storage, deliveries, housekeeping areas and other operational spaces that may not exist in an office. Resolving these issues can require extensive reconstruction.

That makes the purchase price of the original office particularly important. A building may be technically capable of becoming a hotel but still be economically impossible to convert if the acquisition price is too high. This is where the adjustment in office values becomes relevant. As an ageing office becomes less attractive to occupiers and investors, its value can decline. If the property sits in a location where hotel revenues remain strong, a lower acquisition basis may eventually provide enough room to finance the conversion works. The relationship is not automatic. Falling office values do not create successful hotels, but they can change the financial equation surrounding buildings that already possess strong alternative-use potential.

The French hotel investment market provides some support for investors considering that equation. More than €680 million was invested in French hotels during the first quarter of 2026, following a particularly active 2025 when annual transactions exceeded €3 billion. Hospitality therefore continues to attract investment capital despite the uncertainty affecting several conventional commercial property sectors. Investors have also become increasingly comfortable with property where performance depends partly on the operation taking place inside the building. Hotels sit within a wider group of operational assets that includes student accommodation, senior housing and other managed residential formats. These sectors require different expertise from conventional office investment, but they can provide access to income streams driven by different economic factors.

The opportunity outside Paris requires greater caution. Lyon has a substantial office market and experienced a sharp slowdown during the first half of 2026, with approximately 63,000 square metres of take-up. That weaker leasing environment could eventually encourage more owners to examine alternatives for properties that struggle to attract tenants. But Lyon’s hotel conversion potential will be highly dependent on location. Central areas benefiting from tourism, business travel, conventions and major transport connections present a fundamentally different proposition from peripheral business districts where visitor demand may be limited.

Marseille presents another possible case. Regeneration has transformed parts of the city while its tourism profile has strengthened. Commercial buildings close to the Old Port, major railway connections and established visitor destinations could potentially attract hospitality interest where the property characteristics and acquisition price support conversion. This should not be interpreted as evidence of widespread office-to-hotel redevelopment in Marseille. The opportunity remains asset-specific and would need to be tested against local hotel supply, operating performance and construction costs.

Nice has a different property structure. Its international tourism market provides a strong foundation for hospitality, but the pool of obsolete institutional offices suitable for conversion may be smaller than in major commercial centres such as Paris or Lyon. Bordeaux similarly combines tourism with a significant regional economy. Individual central properties with appropriate architecture and strong accessibility could potentially support hotel repositioning, although there is not currently evidence of a large conversion pipeline.

The differences between these cities illustrate why the trend should be viewed as an investment strategy rather than a new national development model. The important question is not whether a city attracts tourists. It is whether an individual office can generate greater value under another use after accounting for every cost involved in changing the building.

Planning can determine the answer. Changing a commercial property into a hotel may require approval for a different use as well as compliance with accessibility, fire protection and building regulations. Historic buildings can introduce additional restrictions, particularly in central districts where hotel demand might otherwise make conversion attractive. Municipal policy can also influence what happens to obsolete offices. French cities face competing demands for housing, employment, tourism and economic development. A hotel may provide the highest theoretical return for an investor while another use is favoured by local planning priorities.

For that reason, alternative-use analysis increasingly needs to begin before an investor buys the property. The potential room layout needs to be tested. Construction requirements must be understood. Planning risks need to be assessed. Hotel demand and achievable room rates must be examined, while a suitable operator or brand may need to be identified. Only after those questions have been answered can an investor calculate what the existing office is actually worth.

This is an important distinction because a cheap office is not necessarily a conversion opportunity. The most interesting properties are those where declining office economics coincide with a stronger alternative use. Hotels will also compete with other potential solutions. France’s housing shortage creates an obvious case for residential conversion in suitable locations. Offices close to universities might support student accommodation, while buildings near medical and research clusters could have completely different possibilities. Each alternative has its own physical, regulatory and financial requirements.

Hospitality becomes compelling where the building is located in a strong visitor market, the structure can be adapted efficiently and projected hotel income is sufficient to cover the acquisition and redevelopment costs. Paris currently offers the clearest combination of these conditions.

The wider implication for French property investment is that an office building’s existing use can no longer always be assumed to represent its highest future value. As owners confront vacancy, refinancing requirements and increasingly expensive refurbishment programmes, more properties will have to be evaluated according to what they could become rather than what they have historically been.

That process will not transform every obsolete office into a hotel. It could, however, create a small but increasingly important acquisition pipeline for hotel investors and operators prepared to look beyond conventional hospitality assets. For some of France’s ageing offices, the next tenant may therefore never arrive. The more important question may be whether the building should still be an office at all.

Source: CIJ.World UK Research & Analysis Team

London’s Premium Office Market Breaks Away as West End Scarcity Pushes Rents Higher

London’s office recovery is becoming increasingly uneven. While headline leasing figures suggest that demand across the capital is improving, the strongest rental growth is being concentrated within a remarkably small collection of high-quality buildings. Nowhere is this more visible than in the West End, where Mayfair and St James’s are increasingly operating at price levels far removed from much of the wider London office market.

Second-quarter 2026 leasing data reinforces the scale of the divergence. Central London recorded approximately 2.5–2.8 million sq ft of office take-up during the quarter, depending on the methodology used, with activity running around or above longer-term averages. The West End accounted for approximately 1.25 million sq ft and performed particularly strongly compared with its historical quarterly levels.

More significant than the volume of transactions is the type of accommodation being selected. Around three quarters of Central London leasing during the quarter involved Grade A buildings. The figures suggest that companies have not abandoned offices, but they have become considerably more selective about the buildings they are prepared to occupy.

The consequence is an increasingly severe shortage at the top of the market. By the end of the second quarter, only around 124,000 sq ft of new Grade A accommodation was immediately available across Mayfair, St James’s and Soho combined. For companies seeking premium space in these locations, the number of realistic options has therefore become extremely limited.

That scarcity is translating directly into rents.

Prime Mayfair and St James’s offices were being valued at around £200 per sq ft during the second quarter according to some market measures, approximately 18% higher than a year earlier. Individual transactions have reached similar levels, while exceptional buildings have occasionally exceeded £200 per sq ft.

These figures should not be interpreted as the normal rent for every West End office. They instead reveal the emergence of a relatively small super-premium segment in which location, building quality and scarcity can command prices considerably above the wider market.

The comparison with the City is striking. Prime City office rents have been running at roughly half the levels achieved by the most expensive Mayfair and St James’s properties. The difference cannot be explained by building quality alone. The West End’s most exclusive districts offer a combination of limited development opportunities, prestige, amenities and proximity to wealthy residential neighbourhoods that is difficult to reproduce elsewhere.

Supply constraints are reinforcing this advantage. Vacancy across Mayfair and St James’s was around 4.4% at the end of the second quarter, below the area’s longer-term average. More importantly, a significant proportion of the buildings expected to complete over the next several years have already attracted occupiers.

Around half of Mayfair’s development pipeline through 2029 was already committed or subject to negotiations by the middle of 2026. In St James’s, the proportion was considerably higher at approximately three quarters. Companies requiring larger quantities of premium space are consequently having to make decisions well before buildings are completed.

This behaviour is particularly important for investors because it suggests that rental growth is being supported by structural scarcity rather than simply a short-term increase in leasing activity.

There is very little land available for major office development in Mayfair and St James’s. Planning constraints, heritage considerations, existing ownership structures and the physical character of these districts restrict the amount of new space that can be introduced. Even when new or extensively refurbished buildings are delivered, they represent relatively small additions to the overall market.

Soho is increasingly participating in the same trend, although at lower rental levels. Its appeal has strengthened among technology, media and creative companies that value access to restaurants, entertainment, transport and London’s broader cultural economy. The rapid development of artificial intelligence businesses has added another source of demand for well-located modern offices.

Technology companies have been particularly focused on Grade A accommodation. Rather than simply looking for the lowest occupancy cost, many businesses appear prepared to pay more for buildings capable of supporting recruitment, collaboration and employee retention.

This helps explain one of the apparent contradictions of the post-pandemic office market. Hybrid working was initially expected to weaken landlords’ pricing power because companies would require less space. In parts of the West End, the opposite effect may be emerging.

Companies can reduce the amount of space they occupy while allocating more money to each square foot. A business moving from a larger secondary office into a smaller premium building can accept a significantly higher headline rent without increasing its total property expenditure proportionately.

The office consequently becomes less about accommodating every employee every day and more about providing a location capable of attracting people when they do come together.

Marylebone is also benefiting from this shift, although it should not yet be placed in the same rental category as Mayfair and St James’s. Supply is relatively constrained and good buildings can command strong rents, but Grade A pricing has generally remained below the levels achieved in London’s most expensive office districts.

Its importance may instead lie in what happens next. As companies struggle to find suitable accommodation in Mayfair, St James’s and Soho, neighbouring districts with strong transport connections and attractive environments could capture displaced demand. Marylebone is well positioned to benefit from that movement.

The greatest risk in interpreting the West End market is assuming that rising prime rents are lifting every building equally.

They are not.

The divide between premium and secondary offices is becoming increasingly visible. Market evidence indicates that prime Central London office values have risen over the past year while weaker assets have continued to lose value. The difference is increasingly determined by the amount of capital required to make a building competitive.

Older offices may share the same Mayfair, Soho or Marylebone address as successful premium properties but face an entirely different leasing environment. Poor energy performance, dated mechanical systems, inefficient layouts, inadequate amenities or limited outdoor space can make them significantly less attractive to occupiers.

This means geography alone is becoming a less reliable indicator of office value.

A high-quality building in an exceptional location can attract intense competition and record rents, while an outdated property only a few streets away may require substantial incentives and refurbishment expenditure to secure tenants.

That distinction is beginning to influence investment pricing as well as leasing.

Investors are increasingly required to calculate not simply the rent currently being generated but the capital expenditure necessary to maintain the building’s position over the next leasing cycle. Properties requiring extensive upgrades must be acquired at prices capable of supporting those costs.

The result is effectively the development of several London office markets operating simultaneously.

At the top is a small collection of exceptional buildings where supply is scarce, tenant demand remains deep and rents can approach or exceed £200 per sq ft. Below this sits the broader Grade A market, where occupiers continue to demonstrate a strong preference for modern, efficient accommodation. Further down are secondary properties facing greater leasing competition and potentially significant refurbishment requirements.

The West End illustrates this fragmentation more clearly than almost anywhere else in London.

Mayfair and St James’s are increasingly behaving like a specialist premium market where scarcity and prestige can outweigh conventional rental benchmarks. Soho is moving closer to that dynamic as technology and creative businesses compete for high-quality space. Marylebone provides another potential beneficiary as occupiers search beyond the most supply-constrained districts.

For investors, the implications extend beyond headline rental growth. Buildings capable of satisfying increasingly demanding occupiers could continue to capture a disproportionate share of leasing demand and rental increases. Secondary properties, meanwhile, may require substantially greater investment merely to prevent their competitive position from deteriorating.

London’s office market is therefore not experiencing a uniform recovery. It is becoming increasingly segmented according to quality, location and the amount of capital required to remain relevant.

The extraordinary rents being achieved at the top of the West End should consequently be viewed less as evidence that every London office is becoming more valuable and more as evidence of how scarce the best buildings have become.

The investment question is no longer simply whether West End rents will continue rising. It is whether the widening gap between exceptional and ordinary offices becomes a permanent feature of London’s property market — and how much investors should be prepared to pay for buildings capable of remaining on the right side of that divide.

Source: © CIJ.World UK Research & Analysis Team

Germany’s Office Divide Is Turning Building Quality Into an Investment Risk

Germany’s office market is entering a stage in which the age, specification and future investment requirements of individual buildings may matter more than the direction of the overall market. Vacancy continues to increase across several major cities, but the headline numbers conceal a widening difference between modern offices that companies actively seek and older properties that are becoming progressively more difficult to lease, finance and sell.

German office property values remained under pressure during the second quarter of 2026, with prices 1.2% lower than a year earlier. Yet this national decline tells only part of the story. Prime rents have continued to rise in several major markets despite increasing vacancy, demonstrating that occupiers have not simply stopped needing offices. Instead, companies are becoming much more selective about the buildings they are prepared to occupy.

This is creating an unusual market in which vacancy can rise at the same time as rents increase for the best space. Modern offices in central locations, particularly buildings offering strong environmental performance, efficient layouts and good public transport connections, continue to attract tenants. Older buildings with weaker specifications are accumulating a growing share of available space.

Across Germany’s largest office markets, vacancy increased again during the first half of 2026. Leasing activity was uneven, but demand remained concentrated on higher-quality properties. Berlin provides a particularly clear example. Office take-up strengthened considerably during the first six months of the year and prime rents continued to rise, while older properties and weaker locations faced substantially greater competition for occupiers.

Munich is showing a similar pattern. Leasing recovered during the first half, but companies continued to favour modern, well-connected properties. Frankfurt’s overall leasing market remained comparatively subdued, yet searches for high-quality offices continued to demonstrate that businesses remain willing to pay for the right product. The consequence is that Germany’s office problem is becoming less about the total quantity of empty space and more about which buildings are empty.

That distinction has major implications for investors. For much of the previous property cycle, office buildings could be compared relatively easily through location, rent, lease length and investment yield. Today another variable has become increasingly important: the amount of capital required to keep the property competitive during the next decade.

An office constructed in the 1990s or early 2000s may require extensive investment in heating and cooling systems, insulation, façades, ventilation, lifts, digital controls and internal layouts. Environmental performance is also becoming more important to corporate occupiers, lenders and institutional investors. A building that remains technically usable today may therefore require substantial expenditure before it can compete successfully for future tenants.

This changes how apparent investment discounts should be interpreted. An older building may trade at a significantly lower price per square metre than a newly developed office nearby. At first glance, that difference can appear to represent an attractive investment opportunity. But the acquisition price is only the beginning of the calculation.

If substantial refurbishment expenditure is required immediately after acquisition, the real cost of creating a competitive building may be much closer to the value of modern stock than the initial purchase price suggests. Investors therefore increasingly need to calculate the combined cost of acquisition and modernisation rather than simply comparing headline yields. That creates an important question for Germany’s investment market: how cheap does an ageing office have to become before refurbishment makes financial sense?

For buildings in exceptional locations, the answer may still support substantial investment. Central sites in Berlin, Munich, Frankfurt, Hamburg and other supply-constrained locations can justify major refurbishment because a successfully repositioned property may achieve considerably higher rents.

This creates opportunities for investors capable of purchasing ageing buildings, upgrading them and returning them to the market as modern offices. Retaining and modernising an existing structure can also have environmental advantages compared with demolition and complete reconstruction, particularly where substantial embodied carbon can be preserved.

However, the same strategy becomes much more difficult when the building is in a weaker location. An obsolete office in a peripheral business district may require essentially the same investment in mechanical systems, energy performance and internal refurbishment as a centrally located building. The difference is that the achievable rent after renovation may be considerably lower.

At some point, the economics stop working. This is where Germany’s office correction could evolve into a more fundamental problem of building obsolescence. Some properties may become too expensive to refurbish as offices but remain too valuable for owners to accept the price required by redevelopment investors. These buildings risk becoming trapped between their historical valuations and their economically viable future use.

Converting offices into housing is frequently proposed as a solution, particularly in German cities facing residential shortages. In practice, however, conversion is far from straightforward. Office buildings can have floorplates that are too deep for residential layouts, inadequate natural light, unsuitable structural configurations or circulation systems that are difficult to adapt.

Residential conversion can also require substantial spending on plumbing, kitchens, bathrooms, fire protection, sound insulation and external areas, while planning requirements can add further complexity. For some buildings, residential conversion will provide an attractive alternative. For many others, demolition, substantial reconstruction or continued office use may remain the only realistic options.

The investment decision therefore increasingly depends on the individual building rather than the broader office market. Germany’s financing environment is reinforcing this divide. A modern office with strong tenants, good energy performance and predictable rental income presents lenders with a relatively straightforward refinancing proposition. An older property facing vacancy and requiring substantial refurbishment creates several layers of uncertainty simultaneously.

The lender has to consider not only the current value of the property but also how much additional capital will be required, whether tenants will remain during construction, what rent the renovated building can achieve and whether the owner has sufficient equity to complete the work. This means Germany’s quality divide is increasingly becoming a financing divide.

Owners of older properties approaching loan maturity may therefore face difficult choices. Some will contribute additional equity and refurbish. Others will seek development partners or specialist investors. Some may decide that selling the building at a substantial discount is preferable to committing further capital.

The refinancing cycle could consequently accelerate the transfer of older offices from traditional institutional owners toward investors specialising in redevelopment and repositioning. Germany’s investment market is already becoming more active. Office transaction volumes increased strongly during the first half of 2026 compared with the previous year, although activity remains well below the levels recorded during the cheap-debt era.

Importantly, the recovery is highly selective. Investors have shown greater willingness to acquire properties with secure income and clear investment strategies, while buildings requiring significant expenditure remain harder to price. This suggests the market already understands that prime and secondary offices should not command similar valuations.

The unresolved issue is whether the discount on weaker buildings is large enough. That could become one of the defining investment questions of the next phase of Germany’s property cycle.

A secondary office trading at half its former value is not necessarily cheap if another large amount of capital must be invested before tenants want to occupy it. Conversely, a heavily discounted building in an excellent location could offer considerable upside if refurbishment costs can be controlled and the finished property can capture rising prime rents.

Location itself is also becoming more nuanced. The traditional distinction between Germany’s largest cities and regional markets may matter less than the combination of building quality, tenant strength and local demand. A modern office with a secure tenant in a smaller German city can potentially offer a clearer investment proposition than an outdated building in one of the country’s largest office markets.

Capital is therefore likely to become increasingly selective at building level rather than simply allocating according to city rankings. This changes the meaning of Germany’s rising office vacancy.

The central question is no longer whether companies are reducing their office footprints. Hybrid working has undoubtedly changed space requirements, but the continuing strength of prime rents demonstrates that companies still compete for buildings that meet contemporary expectations.

The deeper problem is that Germany has a substantial stock of offices designed for a different era of occupier demand, energy costs and investment requirements. During the next several years, the market will have to determine which of those buildings can economically be modernised.

Some will become successful refurbishment projects. Others will be converted to alternative uses. Buildings on valuable sites may eventually be demolished and replaced. But a portion of the existing stock could struggle to find any financially attractive route forward.

For investors, that distinction matters considerably more than the national vacancy rate. Germany’s office market is increasingly dividing between buildings capable of attracting tenants, finance and investment capital and those requiring increasingly expensive intervention simply to remain competitive.

The next major repricing of German offices may therefore have little to do with whether Berlin performs better than Frankfurt or Munich outperforms Hamburg. It may instead occur building by building, as investors calculate which ageing offices can profitably be given a second life—and which have reached the point where their existing use no longer justifies the capital required to save them.

Source: CIJ.World Research & Analysis Team

China’s Office Reset Is Beginning to Reward the Best Buildings

China’s office downturn is entering a more complicated phase. Vacancy remains high, rents are still declining and another substantial pipeline of new space has yet to reach the market. Yet beneath those weak headline indicators, leasing activity is beginning to improve. Lower occupancy costs are encouraging companies to relocate, expand and, increasingly, move from older buildings into higher-quality offices. That creates a very different investment question from whether China’s office market has reached the bottom. The more important issue is whether several years of falling rents and property values have finally reduced costs enough to change occupier behaviour.

During the second quarter of 2026, average office vacancy across major Chinese markets remained close to 25%, while rents declined by a further 2.2% from the previous quarter and were around 4% lower over the first six months of the year. On those numbers alone, there is little evidence of a conventional recovery. Demand indicators, however, tell a more encouraging story. Nationwide office absorption reached approximately 570,000 square metres during Q2, increasing by around 9% from the previous three months. Leasing associated with newly established businesses and corporate expansion also increased significantly compared with a year earlier.

Shanghai provides perhaps the clearest indication that falling rents are beginning to generate a response from tenants. Office absorption increased again during the second quarter, extending an improving trend to six consecutive quarters. Depending on the geographic boundaries and building categories measured, market research places quarterly absorption between approximately 168,000 and 232,000 square metres. The precise figures differ between datasets, but the direction is consistent: more space is being occupied even as rents continue to adjust downward.

One reason is that the gap between what companies can afford and the quality of office they can occupy has narrowed considerably. During the stronger years of China’s office cycle, moving from an older building into a modern Grade A property often required a substantial increase in rental expenditure. Companies could improve their location, building specifications and workplace environment, but only by accepting higher occupancy costs. Several years of rental reductions have changed that calculation. Businesses can increasingly relocate into modern buildings without the financial penalty that previously accompanied an upgrade. In some cases, companies can secure significantly better premises while keeping their overall property costs relatively stable.

This is creating an important redistribution of demand. Rather than generating entirely new office requirements, part of the leasing improvement reflects companies moving from weaker buildings into better ones. For landlords of high-quality properties this is positive, but for owners of ageing offices the same process can create another vacancy. Shanghai is increasingly demonstrating this divergence. Better buildings in established commercial locations are attracting companies looking to improve their premises while rents remain favourable. Technology, financial services and professional-services businesses have been among the more active occupier groups, while newer industries including artificial intelligence and digital businesses are contributing additional demand.

At the same time, average rents continue to decline. Prime central Shanghai office rents remained under pressure during the second quarter, as did those in decentralised business districts. However, some well-occupied buildings have started to reduce the incentives offered to prospective tenants. This is an important early signal because a market does not necessarily recover when its average rent begins rising. The first stage can occur when its strongest landlords simply stop competing as aggressively for tenants. China’s office market may now be approaching that point in selected buildings and locations.

This does not apply universally. Conditions differ substantially between cities and even between districts within the same city. Beijing illustrates the problem. Vacancy has been declining, partly because comparatively little new space has recently entered the market, but leasing demand remains cautious. Landlords continue to compete aggressively to retain major occupiers, while many tenants prefer offices requiring minimal additional spending on fit-out. Some Beijing technology districts are performing better, supported by businesses involved in artificial intelligence, robotics and financial technology, but the wider market remains considerably more subdued than Shanghai’s improving absorption numbers might suggest.

Shenzhen and Guangzhou are producing other pockets of demand. Technology companies, intelligent hardware businesses, cross-border commerce and Chinese companies expanding internationally are supporting leasing activity. These emerging sectors are becoming increasingly important as more traditional office users remain cautious about expansion. China therefore does not have a single office recovery; it has a collection of increasingly different submarkets.

That distinction is particularly important because the supply problem remains unresolved. The major Tier 1 cities received less new office space during the first half of 2026 than a year earlier, giving landlords some breathing room to absorb existing vacancies. But the development pipeline has not disappeared. Several million square metres of additional offices are expected to reach the largest cities during the second half of the year. Shanghai itself continues to add new buildings, and even with improving tenant demand, additional supply will intensify competition between landlords and could delay a broader recovery in rents.

The most important consequence may therefore be accelerating obsolescence rather than rapidly falling vacancy. When a company moves from an older building into a new Grade A tower, the city does not necessarily gain a significant amount of additional occupied office space. The vacancy simply moves. For investors, however, the financial consequences can be substantial. The modern building gains a tenant and strengthens its income, while the older building loses occupancy and faces greater pressure to reduce rents, improve specifications or spend capital on refurbishment. Over time, this can create a widening valuation gap between properties capable of attracting upgrading tenants and those increasingly excluded from corporate leasing requirements.

Similar patterns have emerged in major office markets elsewhere in the world following the expansion of hybrid working. Demand has not disappeared entirely, but occupiers have become more selective about where they are prepared to locate employees. Better transport connections, modern mechanical systems, sustainability performance, workplace amenities and professional building management become increasingly important. China’s unusually large rental correction adds another dimension because high-quality offices that were once beyond the budgets of many companies are becoming financially accessible. This creates the possibility that declining rents themselves become part of the mechanism that eventually stabilises the market.

The investment market is beginning to respond as well. Commercial property transaction volumes strengthened during the second quarter of 2026, while domestic companies, insurers and institutional investors became increasingly important purchasers. Office buildings have attracted particular interest where prices have fallen sufficiently to justify either long-term investment or occupation by the buyer. For investors considering offices, however, cheap pricing alone is unlikely to be enough. An office building can appear inexpensive compared with its historical valuation while continuing to lose tenants, income and competitiveness. A falling acquisition price does not automatically compensate for structural obsolescence.

The more attractive opportunity may instead lie in buildings capable of benefiting from the redistribution of demand. These are likely to be properties in established business locations, with modern specifications, good transport access, strong management and the ability to accommodate companies seeking higher-quality workplaces without dramatically increasing occupancy costs. That creates an unusual situation in which China’s office market can remain oversupplied nationally while individual buildings begin performing considerably better.

The national vacancy rate of around 25% therefore risks concealing what may become the defining characteristic of the next stage of the cycle: increasing separation between winners and losers. For weaker properties, falling rents can become destructive. Owners reduce rents to retain tenants, income falls, refurbishment becomes harder to finance and occupiers continue migrating toward newer alternatives. For stronger properties, the same decline in market rents can have the opposite effect. Lower costs enlarge the pool of companies able to occupy them, increasing leasing activity and gradually rebuilding occupancy.

China’s office market therefore does not need every company to expand dramatically for its best buildings to recover. It needs enough businesses to decide that today’s prices make better offices worth taking. Shanghai’s improving absorption suggests that process may already have started. The opportunity for property investors is consequently more selective than simply buying Chinese offices because prices have fallen. The potential lies in identifying the buildings toward which tenants are moving rather than the ones they are leaving.

China’s office correction is not over. Vacancy remains elevated, rental pressure persists and substantial new supply is approaching. But after several years in which falling rents were primarily evidence of distress, they are beginning to perform another function: making better offices affordable to a wider group of occupiers. That may ultimately prove to be the first meaningful stage of the market’s recovery.

Source: CIJ.World Research & Analysis Team

From Runways to Real Estate: Japan’s Airports Expand Their Economic Reach

Japan’s largest airports are evolving into something considerably more valuable than transport infrastructure. Major investment around Tokyo and Osaka is increasingly connecting aviation with logistics, hotels, retail, research facilities and commercial development, creating new opportunities for property investors around some of the country’s most important international gateways.

Narita, Haneda and Kansai International Airport illustrate three different versions of this transformation. Their development strategies vary according to location and economic function, but each demonstrates how investment in aviation infrastructure can influence surrounding property markets and generate commercial activity extending beyond the terminal.

The change comes as Japan experiences strong international tourism while simultaneously upgrading transport and logistics infrastructure. Airport operators are also looking beyond traditional aviation income, making commercial property, hospitality and passenger services increasingly important components of long-term development strategies.

Narita offers perhaps the strongest example of the relationship between airport expansion and logistics real estate. The airport is preparing for a major increase in capacity involving additional runway infrastructure, changes to passenger facilities and substantial improvements to cargo operations.

Freight already represents an important part of Narita’s economic role. Its position within Greater Tokyo, international connections and access to road infrastructure have supported a substantial concentration of warehousing and freight-related businesses around the airport. Further expansion could reinforce that position.

Plans to modernise and reorganise cargo facilities should create opportunities for logistics operators requiring rapid access to international markets. Rather than competing purely with conventional distribution centres, airport-related warehouses can serve industries where delivery speed, security or specialist handling are particularly important.

Pharmaceuticals, precision components, electronics and other high-value products are natural examples. These supply chains can place greater value on proximity to international air connections than companies distributing ordinary consumer goods. This creates a wider property effect as demand can spread into surrounding locations suitable for warehousing, freight forwarding, processing and other aviation-related businesses. Improvements to road and rail connections can further increase the attractiveness of these areas.

Haneda presents a very different real estate opportunity. Its location within the Tokyo metropolitan area means that the value of airport connectivity extends beyond logistics. Businesses can combine immediate access to international aviation with proximity to one of the world’s largest commercial centres.

Development around the airport already demonstrates this potential. Land close to Haneda has been transformed into a substantial innovation district combining offices, research facilities, healthcare-related activities, meeting venues and commercial uses. Rather than operating as an isolated business park, the district benefits from its position between the airport and Tokyo’s wider rail network. This makes it suitable for companies involved in technology, research and internationally connected industries that value accessibility to both the city and overseas markets.

Hospitality has become another major component of Haneda’s property landscape. Large-scale hotel, retail, restaurant, leisure and conference facilities directly connected with the international terminal demonstrate how airports can capture economic activity generated by passengers rather than simply moving travellers through the building.

This is particularly relevant in Japan as inbound tourism remains an important source of economic growth. International gateways can support hotels not only through overnight travellers but also through conferences, business meetings, airline activity and visitors requiring accommodation before early departures or after late arrivals.

Kansai International Airport provides another variation. Serving the Osaka metropolitan area and the wider Kansai economy, the airport has undergone extensive terminal redevelopment designed to increase international capacity while improving passenger circulation and commercial facilities.

The expansion of retail and food-and-beverage space demonstrates how airport redevelopment increasingly incorporates property economics into infrastructure planning. Passenger terminals are becoming commercial environments where shopping, dining and services form an important part of the airport’s financial model.

Kansai also has an important logistics role. Specialist freight associated with pharmaceuticals and other sensitive products demonstrates how aviation hubs can support technically demanding property uses that are difficult to reproduce in ordinary warehouse locations. Temperature-controlled facilities, secure handling areas and specialist distribution infrastructure can therefore form part of the wider investment landscape associated with major airports.

The development potential extends into Japan’s broader logistics market. Distribution networks are being reconsidered as operators respond to labour shortages, transportation constraints and pressure to improve efficiency. Modern logistics properties increasingly need to provide more than warehouse capacity. Access to workers, highways, ports, airports and major consumer markets can determine whether a facility remains competitive over the longer term.

Airport locations that combine several of these advantages can therefore become strategically important within national and regional distribution networks. There are nevertheless limits to airport-led property development.

Land surrounding airports is subject to constraints that conventional development sites may not face. Aviation safety requirements, noise considerations, building-height restrictions and infrastructure requirements can restrict development options. Some airports are also located too far from established urban centres to generate substantial conventional office or residential demand.

For this reason, Japan is unlikely to develop a uniform model in which every large airport becomes a new mixed-use city. The stronger opportunity lies in specialisation.

Narita can strengthen its position as an international cargo and logistics gateway. Haneda can continue developing commercial, hospitality and innovation uses that benefit from its exceptional metropolitan location. Kansai can combine international passenger growth with commercial redevelopment and specialist freight activity.

These differences matter for investors because the value of airport-related property ultimately depends on what each aviation hub connects. A warehouse close to an airport does not automatically become more valuable because aircraft operate nearby. The investment advantage emerges when an occupier genuinely benefits from international freight capacity, passenger flows, transport connections or access to businesses concentrated around the airport. The same principle applies to hotels, offices and commercial space.

As Japan continues investing in its international gateways, the real estate story surrounding airports is therefore becoming more sophisticated. The opportunity is no longer simply to develop land beside transport infrastructure but to identify property uses capable of converting connectivity into sustainable demand.

Japan’s major airports are consequently beginning to function as broader economic platforms. Runways and terminals remain their foundation, but logistics facilities, hotels, research centres, shops and commercial developments are extending their influence far beyond aviation.

For the property market, that creates a new investment geography in which some of Japan’s most important future real estate locations may be shaped not around traditional city centres, but around the infrastructure connecting those cities with the rest of the world.

Source: © CIJ.World Japan Research & Analysis Team

From Industrial Zones to Investment Hubs: Africa’s New Manufacturing Property Map

Africa’s expanding network of special economic zones is beginning to create a new class of industrial property markets, but a widening divide is emerging between locations that have attracted factories, warehouses and international occupiers and those that remain primarily development ambitions. For investors, that distinction is becoming increasingly important. Governments across the continent have used preferential tax treatment, simplified administration and designated industrial areas to encourage manufacturing investment. Yet experience increasingly suggests that incentives alone are not enough. Manufacturers need dependable electricity, efficient transport connections, serviced land, suitable buildings, skilled workers and predictable operating conditions.

The result is an emerging hierarchy of African industrial locations. At one end are established manufacturing ecosystems such as Tangier, where ports, factories, suppliers and logistics infrastructure operate together. At the other are zones with large investment pipelines but considerably less completed industrial activity. Between them is a growing group of projects in Nigeria, Kenya, Rwanda, Gabon, Egypt and Ethiopia attempting to turn infrastructure investment into functioning industrial property markets.

Morocco provides perhaps the clearest example of how far the model can develop. The industrial platform associated with Tanger Med now extends across approximately 3,000 hectares and accommodates around 1,500 companies supporting more than 145,000 jobs. Automotive manufacturing has become particularly important, but the ecosystem has expanded into logistics, electronics, food production and other industrial activities. Tangier’s advantage comes from the combination rather than any single incentive. Manufacturers have access to a major international port, road and rail infrastructure, established suppliers and industrial land while remaining geographically close to European markets. New factories and logistics facilities continue to open, reinforcing an existing industrial base rather than attempting to create one from nothing.

This makes Tangier an important benchmark for the rest of Africa. Its development demonstrates that the most successful zones eventually cease to function as isolated areas offering preferential conditions and instead become integrated manufacturing and logistics economies.

Nigeria is developing a different version of this model around Lekki. Lagos Free Zone covers approximately 860 hectares and is increasingly combining industrial property with one of West Africa’s most important new maritime gateways. Manufacturers already operating within the development include international businesses from food production, consumer goods, chemicals and industrial sectors. The presence of Lekki Deep Sea Port changes the property proposition significantly. Manufacturing and distribution facilities can be positioned close to maritime infrastructure, reducing some of the logistical disadvantages associated with moving goods through congested parts of Lagos.

The zone provides serviced industrial land alongside completed warehouses and factory buildings, giving occupiers the option of developing their own facilities or moving into existing space. Utilities, telecommunications and supporting infrastructure are also incorporated into the development. Institutional capital has begun to recognise the model, with IFC committing up to US$50 million to support further development of the zone, including industrial infrastructure and serviced land. This is significant because it demonstrates that African SEZs can attract international investment not simply into individual factories but into the property platform supporting those occupiers.

Kenya provides another increasingly property-led example through Tatu City outside Nairobi. Rather than functioning purely as a traditional industrial zone, the development combines manufacturing, logistics, commercial and residential uses within a large master-planned environment. More than 100 businesses are operating or developing facilities there, while the industrial component increasingly includes purpose-built warehouses and logistics properties as well as land for manufacturing.

The first phase of the Link Warehousing & Logistics Park opened following approximately KES2.5 billion of investment, providing units ranging from smaller warehouse facilities to spaces suitable for substantially larger occupiers. Further expansion is planned, illustrating growing demand for professionally developed logistics buildings rather than basic industrial sheds. Tatu City’s attraction is closely connected to infrastructure. Reliable utilities, internal roads, security and planned development allow occupiers to avoid some of the infrastructure problems associated with less organised industrial districts. For investors, this creates the possibility of developing institutional-quality property within an environment where the surrounding infrastructure is controlled as part of the wider project.

Gabon offers a more specialised example through Nkok. Rather than attempting to compete across every manufacturing category, Nkok has built a significant industrial cluster around timber processing. The zone covers more than 1,100 hectares, with roughly 600 hectares developed, and has attracted more than 140 investors across numerous sectors. Wood processing is particularly important because it demonstrates how an African SEZ can connect industrial property directly with domestic resources. Timber can move through several stages of processing within the industrial ecosystem rather than leaving the country largely as an unprocessed commodity.

New projects are broadening the range of activities at Nkok, although it is important to distinguish between operating facilities and developments that remain under construction. Proposed steel production and digital infrastructure investments, for example, add to the future pipeline but should not yet be treated as completed industrial capacity.

Rwanda’s Kigali Special Economic Zone represents a smaller but comparatively structured model. Its first phase covers approximately 98 hectares and provides businesses with roads, electricity, water, telecommunications and other essential infrastructure. Manufacturing companies are already operating from the zone, while investment is gradually expanding into more specialised property. A new cold-chain packhouse opened during 2026, with a larger cold-storage facility planned for 2027.

This illustrates another direction for African industrial real estate. Future SEZ demand will not necessarily come solely from conventional manufacturing. Agricultural exports, pharmaceuticals, food processing and temperature-controlled logistics can create requirements for specialised buildings that are considerably more sophisticated than traditional warehouse stock.

Egypt’s Suez Canal Economic Zone presents an opportunity on a much larger scale, but it also demonstrates why announced investment needs to be separated from delivered property. Qantara West has accumulated dozens of contracted industrial projects representing substantial proposed investment and several million square metres of allocated land. Those commitments indicate considerable investor interest, but contracts and investment agreements do not automatically represent operating factories.

Physical development is nevertheless progressing. Infrastructure has been completed across parts of the zone and factories have begun opening. More importantly for commercial property investors, developers are now committing capital to ready-built factories and storage facilities rather than concentrating exclusively on the sale or allocation of industrial plots. One programme announced during 2026 envisages approximately 150,000 sqm of ready-built factory and storage accommodation following investment of around EGP2.4 billion, while other industrial-building programmes are also planned.

This could mark an important evolution in Egypt’s SEZ model. Providing completed buildings allows companies to establish operations without purchasing land and developing factories independently. It also creates an asset that can potentially generate rental income, bringing SEZ development closer to the conventional institutional industrial-property model.

Ethiopia provides perhaps the clearest warning against measuring success simply by counting industrial parks. The country has invested heavily in purpose-built manufacturing locations, particularly for textiles, apparel, pharmaceuticals and export-oriented production. Several have genuine operating businesses and substantial physical infrastructure, but performance differs considerably between locations. Hawassa remains one of the most established examples, with most of its factory sheds leased. Bole Lemi also contains completed manufacturing facilities, while Kilinto has been developed with a particular focus on pharmaceuticals and technology.

These projects have generated jobs, exports and manufacturing investment, and further occupier expansion continues. However, financial performance across Ethiopia’s publicly managed industrial parks remains uneven, with activity and revenues concentrated heavily in the stronger locations. The experience illustrates an important lesson for the wider African market: constructing industrial buildings does not automatically create an industrial economy. Without sufficient occupier demand, infrastructure, competitive operating costs and connections to suppliers and export markets, completed factory space can remain underused.

The same principle will increasingly influence commercial real estate investment across the continent. The strongest SEZs are beginning to provide investors and occupiers with several different property products. These include serviced industrial plots, completed factories, build-to-suit facilities, modern warehouses, cold storage and logistics parks. In more advanced locations, these assets are being integrated with ports, railways, highways and inland freight infrastructure.

That relationship between transport corridors and industrial property could become increasingly important. Africa is investing heavily in improving connections between ports, inland markets and neighbouring countries. As those routes become more efficient, strategically positioned SEZs could provide locations where goods are manufactured, processed, stored and redistributed rather than simply transported through the continent.

AfCFTA could strengthen this model further. If practical barriers to intra-African trade continue to fall, manufacturers may eventually be able to serve several countries from a single regional production base. Logistics companies could similarly operate larger distribution centres designed around regional rather than purely national supply chains. That would increase the attraction of SEZs positioned close to major ports and cross-border transport routes. Instead of being primarily export enclaves serving markets outside Africa, successful zones could gradually become production and distribution platforms for the continent’s own expanding consumer economies.

The implications for industrial land could also be significant. Sites combining reliable electricity, water, fibre connectivity and direct transport access should command an increasing advantage over unserviced industrial land, even where the latter is considerably cheaper. For institutional investors, however, the quality of the underlying property market remains critical. Clear ownership, enforceable leases, credible occupiers, predictable regulation and the ability to exit an investment are as important as construction costs or tax concessions.

This is where the divide between Africa’s SEZs is likely to become increasingly visible. Tangier already demonstrates the characteristics of a mature international manufacturing ecosystem. Lagos Free Zone is developing a strong port-linked industrial platform. Tatu City is demonstrating how privately developed infrastructure can support institutional-quality logistics property. Nkok shows the potential of sector-focused processing clusters, while Kigali illustrates how smaller markets can compete through organisation and specialised infrastructure.

Egypt offers enormous scale and an expanding development pipeline, but the amount of operating industrial space still needs to be distinguished carefully from announced investment. Ethiopia, meanwhile, demonstrates both the potential of large-scale industrial-park development and the risks created when supply grows faster than sustainable occupier demand.

Africa’s next manufacturing winners are therefore unlikely to be determined by which governments provide the most generous incentives. The more important competition is becoming physical: which locations can provide factories with continuous power, functioning logistics, suitable buildings, development-ready land, efficient administration and connections to suppliers and workers.

That shift has important consequences for commercial real estate. The continent’s most successful SEZs are evolving from policy instruments into identifiable property markets, with their own development pipelines, occupiers and increasingly specialised industrial assets. Africa’s improving transport corridors may determine where goods can move efficiently. The SEZs that successfully combine those connections with reliable infrastructure and investible real estate could determine where an increasing share of those goods are actually manufactured, stored and distributed.

Source: © CIJ.World Africa Research & Analysis Team

India’s Manufacturing Expansion Is Opening New Markets for Industrial Real Estate

India’s manufacturing strategy is beginning to alter the country’s industrial property landscape as investment spreads beyond established metropolitan areas towards a wider network of planned production and logistics centres.

At the heart of this transition is the National Industrial Corridor Development Programme, which links manufacturing locations with highways, freight railways, ports and other major infrastructure. The programme currently encompasses 11 industrial corridors and 32 projects at various stages of development. The scale of the initiative is significant, although the locations within it are far from uniform. Some industrial areas are already developed, several are approaching completion and others remain at much earlier stages of implementation.

Among the most advanced are Dholera in Gujarat, Shendra-Bidkin in Maharashtra, the Integrated Industrial Township at Greater Noida and Vikram Udyogpuri in Madhya Pradesh. These locations demonstrate India’s attempt to provide manufacturers with prepared development areas where essential infrastructure is established before major occupiers arrive.

Other projects are progressing at Tumakuru in Karnataka and Krishnapatnam in Andhra Pradesh, while logistics infrastructure around Haryana and Greater Noida is strengthening connections between manufacturing locations and national distribution networks.

The programme entered another phase when the central government approved 12 additional industrial cities in 2024. Together, the projects cover almost 26,000 acres across ten states and involve planned public investment of approximately ₹28,602 crore.

The new locations include Khurpia, Rajpura-Patiala, Hisar, Agra, Prayagraj, Gaya, Dighi Port, Jodhpur-Pali-Marwar, Kopparthy, Orvakal, Zaheerabad and Palakkad. Government projections suggest these developments could eventually attract more than ₹1.5 lakh crore of investment and support close to one million jobs. These remain targets rather than completed investment, but they demonstrate the scale of the manufacturing geography India is attempting to create.

For commercial real estate, the significance goes considerably further than providing land for factories. India already has a substantial institutional industrial and logistics property sector, particularly around Delhi-NCR, Mumbai, Bengaluru, Chennai, Pune, Hyderabad, Kolkata and Ahmedabad. Modern warehouses, logistics parks and purpose-built manufacturing facilities have attracted considerable domestic and international capital.

Industrial corridors could now help extend this market into a much broader group of locations. This is particularly important because modern manufacturers increasingly assess entire operating environments rather than simply comparing land prices.

A major production facility needs dependable electricity, water, road access, rail connections, workers, suppliers and logistics infrastructure. Export-oriented businesses may also require efficient connections to ports, while advanced manufacturing companies need access to engineering and technical skills. When these elements are available within or around a planned industrial location, the time and complexity involved in establishing production can be reduced.

That principle becomes particularly important as India attempts to expand domestic manufacturing across electronics, automobiles, pharmaceuticals, engineering, renewable-energy equipment, defence-related production and food processing.

Large manufacturing projects also create demand well beyond the factory itself. An automotive plant, for example, can attract component producers, engineering companies, packaging businesses and logistics providers. Electronics manufacturing creates similar supplier networks, while pharmaceutical clusters require specialist storage, distribution and research facilities.

This can produce a much larger property market around the original investment. The result is that India’s manufacturing expansion increasingly has the potential to generate clusters containing factories, warehouses, distribution centres, research facilities and supporting commercial property.

Industrial and logistics demand remained strong during the first half of 2026. Depending on the methodology used, market surveys recorded more than 30 million sq. ft. of leasing across India’s leading industrial and logistics locations, while manufacturing-related demand showed particularly strong growth.

Third-party logistics companies, engineering businesses, automotive occupiers, e-commerce companies and manufacturers continue to account for a substantial proportion of activity.

Modern industrial stock is also expected to expand significantly during the remainder of the decade. India’s eight principal markets currently contain hundreds of millions of square feet of Grade-A industrial and warehousing space, with forecasts indicating that supply could exceed 500 million sq. ft. by 2030.

The more interesting question is how much of the next wave of development will occur outside those established locations. Rising land prices and congestion around major cities are already encouraging developers and occupiers to examine peripheral and regional markets. New expressways, freight routes and industrial corridors are making some of these locations increasingly practical alternatives.

Research published in 2026 identified around 30 Indian cities with meaningful long-term industrial and warehousing potential, including more than 20 outside the country’s eight principal markets. Not every emerging city will develop into a major institutional property market, but the number of potential locations is increasing.

For investors, this creates different levels of opportunity and risk. Established industrial nodes can provide stabilised warehouses and manufacturing properties capable of generating immediate rental income. Developing locations may offer opportunities for build-to-suit facilities and logistics parks anchored by individual occupiers.

Earlier-stage industrial cities provide a different proposition. Land may be cheaper and potential growth greater, but investment depends much more heavily on infrastructure completion and the arrival of genuine manufacturing demand.

This is why India’s industrial corridors should not be considered one uniform investment market. The Delhi-Mumbai corridor is considerably more advanced than many other parts of the national programme and already contains several of India’s most developed new industrial locations.

The Chennai-Bengaluru corridor is progressing through major projects including Tumakuru and Krishnapatnam, while the Amritsar-Kolkata corridor contains several of the industrial cities approved in the latest expansion programme. Other corridors are at earlier stages and will require considerably more development before they can support mature institutional property markets.

The success of individual locations will therefore depend less on their inclusion on the national corridor map and more on whether infrastructure and occupier demand actually materialise.

For property developers, manufacturing companies themselves may become the catalyst. A large factory commitment can provide the confidence required to develop warehouses, supplier facilities and additional industrial buildings nearby. As more occupiers arrive, the location can gradually develop sufficient scale to attract institutional investors.

Grade-A logistics is likely to be one of the clearest beneficiaries. Manufacturers increasingly require sophisticated distribution facilities capable of supporting automated inventory systems, modern loading infrastructure and larger regional supply chains. Growth in organised retail and e-commerce adds another source of demand.

Industrial corridors can help connect these facilities with both production centres and consumer markets. More specialised property categories could emerge as well.

Cold-storage facilities may develop around food and pharmaceutical clusters. Electronics and engineering locations can create requirements for light-industrial buildings and component warehouses, while advanced manufacturing could generate demand for research and technical facilities. Large industrial employment centres can eventually support workforce housing, retail, hospitality and other commercial services.

The property consequences of a successful industrial corridor can therefore spread far beyond the boundaries of the industrial park itself.

India’s wider transport investment strengthens this opportunity. The country has expanded highways, freight railway infrastructure, ports and multimodal logistics facilities over the past decade. India ranked 38th in the World Bank’s latest Logistics Performance Index, compared with 44th in 2018.

That improvement cannot be attributed to industrial corridors alone. It reflects a much broader modernisation of India’s transport and trade infrastructure. The importance of the corridor strategy is that it can connect those national improvements with specific locations where manufacturing investment takes place.

This also strengthens India’s position as global companies reconsider their supply chains. International manufacturers are increasingly interested in maintaining production across multiple countries rather than depending heavily on one geography. At the same time, Indian companies are expanding domestic manufacturing capacity.

India therefore has an opportunity to capture both international and domestic investment, but infrastructure availability will be only one part of the competition. Labour, energy costs, regulation, supplier networks, taxation and the speed of approvals will remain important when companies choose where to establish production.

Industrial corridors can provide the physical framework, but they cannot create successful manufacturing centres without occupiers. Execution will therefore determine which of India’s new industrial cities become genuine investment markets.

Locations where infrastructure is completed, manufacturers establish operations and supplier networks develop could eventually support significant institutional property portfolios. Others may take much longer to achieve sufficient scale.

For real-estate investors, this makes individual project selection increasingly important. The opportunity is not simply to buy industrial property because it sits somewhere along a nationally designated corridor. The stronger investment proposition will be found where transport infrastructure, manufacturing demand, available labour and supporting services are converging.

India’s industrial property market has already evolved from basic warehouses and owner-occupied factories into a substantial institutional sector. The next stage could be geographical.

If the country’s new industrial cities successfully attract manufacturing investment, institutional-quality warehouses, production facilities and specialist industrial property could spread into markets that currently have little modern stock.

That would make India’s industrial corridors much more than an infrastructure programme. They could become the foundation for a new generation of manufacturing and logistics property markets, expanding the country’s investible industrial geography well beyond its traditional metropolitan hubs.

Source: © CIJ.World India Research & Analysis Team

Bałtyk 2 and 3 Move into Next Construction Phase as Offshore Infrastructure Takes Shape

Construction of the Bałtyk 2 and Bałtyk 3 offshore wind farms has passed another major milestone, with foundations now installed for all 100 planned wind turbines together with the supporting structures for the projects’ two offshore substations.

Developed jointly by Polenergia and Equinor, the two Baltic Sea projects will have combined generating capacity of 1.44 GW. Their progress is also becoming increasingly relevant to Poland’s onshore investment landscape as offshore construction creates requirements for ports, industrial facilities, logistics infrastructure and permanent servicing operations.

The recently completed installation campaign covered 100 monopiles and transition pieces for the turbines as well as two jacket structures that will support the offshore substations. At the busiest point of the operation, approximately 35 vessels were involved around the construction sites.

The turbines planned for the projects will each have capacity of 14.4 MW and reach approximately 260 metres in height. Installing equipment on this scale requires specialised vessels and extensive coordination between offshore construction and the ports and logistics facilities supplying the projects.

Attention will now increasingly shift towards the remaining electrical infrastructure and turbine installation. Work is continuing on export cables and preparations for the network connecting individual turbines, while the offshore substations themselves still have to be installed on their supporting structures.

Turbine installation is scheduled for 2027. Bałtyk 2 and Bałtyk 3 are also expected to begin generating their first electricity during that year, with full commissioning targeted for 2028.

For the property and infrastructure markets, the projects demonstrate how Poland’s offshore wind programme is creating investment requirements far beyond the turbines themselves. Large offshore developments need areas for handling and storing components, specialised port infrastructure, technical facilities, transport connections and bases capable of supporting vessels and maintenance teams.

Łeba is emerging as an important part of this network. An operations and maintenance base there will support Bałtyk 2 and Bałtyk 3, giving the coastal location a role that will extend beyond the construction period. Once the wind farms are operating, servicing the turbines and offshore infrastructure will require technicians, vessels, equipment storage and supporting facilities over the projects’ operating lives.

This longer-term requirement distinguishes operations bases from temporary construction facilities. Offshore wind can consequently generate sustained demand for certain types of coastal property and infrastructure rather than producing activity only while turbines are being installed.

The development of further offshore capacity could also increase the strategic importance of industrial land around Poland’s Baltic ports. Sites capable of accommodating large components, storage, assembly, manufacturing or marine-support activities may become increasingly relevant as the offshore supply chain expands.

Not every coastal location will benefit equally. Port capacity, water depth, available industrial land, road and rail accessibility and proximity to offshore development areas will all influence where supply-chain businesses establish operations.

Grid infrastructure represents another substantial component of the investment programme. Electricity generated offshore must be transmitted to land and integrated into Poland’s power system, requiring subsea and onshore cables, substations and connections with the national transmission network.

For developers and industrial investors, this creates a wider investment map around offshore energy. Opportunities can potentially extend from port-related industrial property and warehouses to manufacturing, component handling, technical facilities and long-term maintenance infrastructure.

The completion of the turbine foundations at Bałtyk 2 and Bałtyk 3 therefore represents more than progress on two individual energy projects. It demonstrates that Poland’s offshore wind programme is moving deeper into physical delivery, with increasingly visible consequences for the country’s ports, logistics networks, industrial locations and coastal infrastructure.

With turbine installation and first electricity expected in 2027 and full commissioning planned for 2028, the next stage will show how quickly the offshore construction programme translates into a broader industrial ecosystem along Poland’s Baltic coast.

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