Major European real estate companies are adapting their existing portfolios to extract higher returns, and this typically means reducing office and increasing hotel allocations.
“Europe’s office market is structurally oversupplied. Vacancy rates haven’t been this high since 2015-16,” commented Richard Candey, head of hotel development, hotel advisory services, Colliers.
The perfect balance
Covivio, the Paris-based real estate investment trust, manages a €23bn portfolio consisting of 50 percent offices, 30 percent residential and 20 percent hotels. Over the next five years, the goal is to balance the portfolio equally across these three asset classes, said Sebastien De Courtivron, deputy CEO Hotels, Covivio.
Aroundtown, one of Europe’s largest real estate companies, is planning to increase its percentage of hospitality assets from 20 to 25 percent, said the group’s COO of the hotel division, Marije Bekker.
Institutional owners typically assess each asset individually to determine whether to hold, sell, refurbish, or repurpose. Converting office buildings to hospitality is one option.
Hybrid assets
“We currently have four projects in France where we are converting offices into hotels, said De Courtivron.
These include a 14,000 square metre asset in Paris where the above-ground floors are becoming a hotel, while 5,500 sq. m. of high-ceilinged underground floors are becoming a membership club with fitness, a swimming pool, and wellness facilities. “It was one of the only hybrid solutions where we found a good ROI,” he commented.
Aroundtown converted Coolse Poort, a 28,000 sq. m. brutalist office building in Rotterdam, into a mixed-use facility comprising accommodation, co-working and fitness facilities. After its conversion and technical modernisation, long-term lease agreements were signed with Numa, Workspot and SportCity. The conversion has been nominated for the Rotterdam Architecture Prize 2026. Bekker commented: “This is the perfect example of driving the overall value of the asset.”
Multiple considerations
There is a rigorous decision-making process to follow when looking at adaptive reuse, said Bekker, and conversion to a hotel or hospitality use is not the inevitable outcome.
“Conversions are not easy. They cost a lot, they’re complex and sometimes we have neighbours who are against them. So those are all considerations. We look at the demand drivers, the zoning, the permits. What is possible? Not everything is possible in all areas,” she explained.
In Germany, the introduction of ‘Bau Turbo’ law has speeded up the approval process for residential development. Aroundtown is currently reviewing 120,000 square metres of office space to determine whether it can be converted into housing.
“We have a very important housing issue that needs to be addressed,” she said. Faster permits also mean others uses such as student accommodation and co‑living may be possible.
Profitability per square metre
On the commercial side, Aroundtown assesses the planning feasibility and the potential number of keys if hospitality is considered. It then tests market appetite: what demand exists, and which operators and brands are interested.
Only after assembling all these pieces does the company decide the best use for the asset. The outcome may be a mixed‑tenant configuration, a single‑tenant conversion, or simply retaining the building as office space, if that remains the most viable option, said Bekker.
Distressed offices
A&O Hostels was founded in Berlin in 2000 and today operates 46 hostels (30,000 beds) across major European cities, with a further 10,000 beds in the pipeline. CEO Oliver Winter said that 90 percent of his hostels are conversions from offices, warehouses, or hotels.
“We bought one massive office here in Berlin close to Checkpoint Charlie, 30,000 square meters, and we’re converting it right now,” he said. “For the next five to ten years we will not run out of distressed office buildings, even if only 10 percent are feasible, it will still be enough.”
Around half of A&O Hostel conversions have been from office buildings. A&O keeps the external structure, but usually guts the interiors, and all civil works and MEP (mechanical, electrical and plumbing) are new.
Hospitality cashflow
Given the choice, however, Winter prefers to convert hotels: “You have cash flow from day one, you have zero risk on planning, because there's your existing hotel permit, even if it takes longer with repositioning and getting maybe a permit for more beds, you can operate it for the time being. So hotels absolutely mitigate risk, though we have had some bad experiences.”
The first time a conversion from an existing hotel took more than five years was for the A&O property in Venice Mestre, in large part due to Italian bureaucracy.
“Unfortunately, we can top this now,” said Winter. “We bought an empty office building for conversion outside Barcelona in 2018 and we’re still waiting for the permit. So that’s the reason we prefer hotel refurbs wherever we can.”
Playing Tetris
Winter explained that hostels have a built‑in structural advantage because they can work with many different room types. Unlike brands such as Moxy or Motel One, which rely on a single, standardised room layout, he said hostels can mix singles, twins, and larger shared rooms: four, six, or eight‑bed configurations. That flexibility means they can take an existing floor plan and “play Tetris” with it, optimising every corner of the building to drive efficiency.
Navneet Bali, the founder and CEO of LyvInn Hotels, said he drew inspiration from what Winter has achieved at A&O Hostels when creating the LyvInn brand which combines budget boutique hotel and hostel elements. Formerly the CEO of Meininger Hotels, Bali has opened the first LyvInn property in Frankfurt.
Adaptive reuse has ESG and financial advantages over new build, said Winter, since it prevents demolition waste, shortens timelines in markets like Germany, and turns underperforming assets into productive ones. Bekker highlighted that 65 percent of Aroundtown’s portfolio is BREEAM certified.
All quotes taken from the ‘Rethinking assets: adaptive reuse and hybrid opportunities’ panel at IHIF EMEA 2026 in Berlin.