Europe’s office market is defined by intensifying demand for best in class space and a growing imbalance between supply and occupier demands, according to Cushman & Wakefield’s latest EMEA Offices Update.
In 2025, Grade A leasing reached a record 52% of all office leasing activity in EMEA, prime rents rose for the 20th consecutive quarter and Grade A vacancy tightened to just 3.5%. At the same time, development pipelines fell to their lowest level since 2016, creating a more competitive landscape for occupiers and renewed opportunity for investors. Lenders also returned with loans of up to 60% loan to value and margins below 200 basis points, reinforcing wider improvements in confidence.
“Quality has become the central focus for occupiers across Europe, and this is tightening the availability of high specification space. Businesses are increasingly aware of these constraints as they plan ahead. Investors are also re‑engaging, supported by improving liquidity and the consistent performance of prime rents,” said Javier Bernades, Head of Offices, EMEA at Cushman & Wakefield.
“The fundamentals at the top end of the market are strengthening,” said Kiran Patel, Head of Office Sector Research, EMEA. “With less than one year worth of take-up currently under construction, prime offices are well positioned for a strong performance over the next few years including sustained rental growth amid tightening supply.”
Flight to quality drives leasing activity
European office take‑up reached 10.5 million sq m in 2025, supported by a strong final quarter (2.9 million sq m) and a decisive occupier pivot towards modern, energy efficient and centrally located space. The dominance of Grade A leasing reflects growing emphasis on workplace quality, talent attraction and long-term corporate strategy. Core central business district locations accounted for 67% of all activity, reinforcing the value occupiers place on connectivity, amenities and collaboration space. Frankfurt continued its recent strong performance with 549,000 sq m leased in 2025. Elsewhere, Vienna, Dublin, Luxembourg and Marseille all increased activity by 20% or more year on year (y-o-y).
Prime supply tightens further
Overall vacancy held steady at 9.8% in the fourth quarter, with considerable variation across markets, with Marseille reporting the lowest level at 3.5%, while Stockholm reported the highest at 18.5% driven by out-of-town vacancy. Prime supply continued to tighten as Grade A availability fell to 3.5%. Several major markets, including Birmingham and Edinburgh, now have less than one year of prime supply, contributing to rising competitive pressure among occupiers.
Rental growth sustained for a 20th quarter
Prime office rents maintained their upward momentum, increasing by 1.4% in the final quarter and by 4.6% over the year. The UK and France led performance, driven by London’s West End, Paris CBD, Leeds, Newcastle and Lyon, all of which saw strong occupier demand for quality space.
Shrinking pipeline signals tighter market ahead
Development activity across Europe contracted further through 2025, with space under construction falling for the fourth consecutive quarter to 10.1 million sq m, the lowest level since 2016. Completions reached 4.4 million sq m for the year, an 11% decline on 2024, as several schemes were pushed into 2026 which is now expected to deliver 5.2 million sq m in new stock. Rising construction costs, higher financing rates and wider viability pressures restricted new starts, resulting in a diminishing pipeline that is likely to tighten supply further in coming years. Larger markets saw notable reductions, including London at 6% and Paris at 7%, while Berlin and Milan recorded even sharper falls at 13% and 37% respectively. Pre‑let levels have risen to 47%, reflecting occupiers moving earlier to secure space in an increasingly constrained development environment.
Cross border capital returns as investment confidence improves
Office investment activity also strengthened with total volumes reaching €52 billion in 2025, a 14% rise compared with 2024, but still well below the 10-year average. London (€15 billion), Paris (€5.8 billion) and major German cities (€7.1 billion collectively) remain the most attractive destinations for investors. Cross border capital flows grew by 45%, led by North America (€2.7 billion). Prime yields moved inward for the sixth consecutive quarter to an average of 5.37%, reflecting improving sentiment and the gradual return of liquidity.
Lenders re‑engage as financing conditions improve
Financing conditions improved as lenders re‑engaged with the sector. Stabilising inflation (notwithstanding impacts from the developing conflict in the Middle East) and stronger leasing fundamentals supported increased availability of debt for core assets, with financing now achievable at up to 60% loan to value and margins below 200 basis points. The continued expansion of non-bank lenders further strengthened liquidity across the market.
Outlook
Looking ahead, Cushman & Wakefield anticipates continued rental growth in 2026 and 2027, although at a moderated pace. Impacts from the conflict in the Middle East are continuing to develop, bringing inflationary pressures and reducing expectations of further rate cuts (particularly in the UK) while adding to the elevated levels of risk globally. The primary challenge for the market remains the limited pipeline of high-quality development. With new starts constrained and Grade A space being absorbed quickly, supply shortages are expected to intensify, reinforcing competition and supporting further rental resilience.