Reviving Vacant Offices: How Short-Term Rentals Are Breathing New Life Into Unused Spaces

According to a recent AirDNA report, the European Union recorded a staggering 44.5 million demand nights for short-term rentals in June, marking an 18.6% increase from the previous year. The number of available listings also jumped to 3.8 million, a 14.8% year-over-year rise.

The sector’s expansion isn't driven solely by families seeking temporary homes or adventurous travellers. In the United Kingdom, urban (24%) and suburban (20%) areas experienced demand growth surpassing that of rural, coastal, and mountain destinations, which saw increases ranging from 12% to 14%.

Urban demand is supported by companies like Bob W and Nestor, which combine hotel-like amenities with the comfort of home-style accommodations for modern travellers balancing business and leisure.

Niko Karstikko, co-founder and CEO of Bob W, and Fran Milsom, founder and CEO of Nestor, recently discussed their strategies for short-term rental growth at the Phocuswright Europe conference. They explored the potential for their companies to rejuvenate urban areas grappling with declining commercial office use.

“There’s immense potential within this sector, even within city limits,” said Karstikko, whose Finland-based company operates in 10 countries and 17 cities across Europe. “London offers almost limitless opportunities. We aim to balance market depth with geographic reach, working towards establishing Bob W as the leading brand in this new hybrid hospitality category.”

Milsom, whose London-based company manages boutique hotels and serviced apartments, noted that Nestor focuses on London.

“Our operational efficiency is highly effective due to our deep market understanding,” Milsom said. “However, we’re open to exploring new opportunities. We were active in Spain before COVID, and if the right opportunities arise, we’ll consider expanding into new markets.”

Karstikko echoed similar sentiments.

“You will see Bob W expand into new cities,” he stated. “We plan to extend our pan-European presence beyond the 17 cities we're currently in, focusing on deepening our presence in existing markets and leveraging current structures.”

True to his word, about a month after the interview, Bob W announced plans to develop between 1,500 and 2,000 new apartments by converting hotel and office spaces in Ireland, Portugal, Spain, and the United Kingdom. This initiative is part of a partnership with Osborne+Co Investment Management to raise £120 million in equity.

Karstikko emphasized the benefits of short-term rentals for cities, noting, “The short-term rental sector is the fastest-growing segment in hospitality. It offers flexibility that traditional hotels lack, allowing us to profit from smaller properties, such as 10-20 unit buildings, which can be challenging for hotels with more rigid structures. This flexibility makes office conversions particularly viable.”

Despite challenges like varying legislation, landlords' reluctance to embrace change, and the costs of property makeovers, Karstikko believes the financial benefits are becoming clear.

Short stay apartments in Melbourne managed by Corporate Keys are an example of how this trend is also gaining traction. Corporate Keys specializes in providing flexible accommodation solutions, catering to the growing demand for short-term rentals in urban areas.

Milsom is optimistic about the progress in London, noting positive developments by local officials.

“There’s promising regulation emerging because office blocks are sitting empty. Selling or leasing these spaces is challenging, so local councils are making it easier to alter planning regulations,” Milsom said.

These zoning changes facilitate the conversion of unused office spaces into hospitality ventures. As short-term rental markets in cities like London approach saturation, such flexibility opens doors for revitalizing these areas, Milsom explained.

“They’re creating new opportunities for restaurants, cafes, activities, and events, transforming what was once a Monday-to-Friday office zone into a vibrant weekend destination,” he said. “It’s crucial for local councils to incentivize and drive these changes.”

Karstikko supported this view, observing, “Empty office buildings in city centres aren’t benefiting anyone. Cities are missing out on foot traffic—cafes are empty, shops see fewer customers, and the overall balance isn’t functioning well.”

He remains optimistic about the future. “The market is enormous and full of potential,” Karstikko remarked. “There’s significant momentum, and it’s an exciting time for us, Nestor, and others in the sector.”

The discussion also touched on how artificial intelligence can enhance guest personalization and the importance of fostering direct relationships with customers who find their properties through online travel agencies.