European office market in 2025: stable take-up, investment market picks up speed

The overall vacancy rate in Europe stood at 9.5% at the end of 2025, an increase of 50 basis points year-on-year. Although the vacancy rate has generally increased due to a growing gap between supply and demand, trends vary greatly by location. In central locations, availability remains limited and is likely to fall even further, especially in the new-build segment, while vacancy rates are rising sharply in the outskirts and for outdated existing properties.

The average vacancy rate in the CBD was 5.6% at the end of 2025, compared to 11.1% in the decentralised locations. Since 2020, the vacancy trend in the central top locations and the less well-connected peripheral locations has diverged. The markets are increasingly divided into two parts. The most pronounced differences are in Barcelona, Paris and Brussels. For example, in Barcelona, the vacancy rate in the CBD is 1.6%, compared to over 12% in the secondary locations. "Hybrid forms of work as well as the renewed focus on communication and meeting colleagues in the office continue to drive user demand for space in established central locations. Accessibility remains just as important as the quality of the property," explains Etienne Prongué.

Prime rents have continued to rise in most European cities, supported by the ongoing shortage of premium space in the absolute top locations. The Southern European markets stood out in particular, with strong rental growth in Milan (+11%), Barcelona (+10%), Madrid (+6%) and Rome (+4%). "In the German office markets, too, the significant excess demand in the premium segment has led to a noticeable increase in prime rents in Germany's top 5 locations. The increase was particularly extensive in Munich at 8%. At currently €58.00/m², Munich is now Germany's most expensive office market. Düsseldorf rose by 6% to €46.00/m² and Hamburg to €38.00/m², with the first deals above €40/m² also registered in the Hanseatic city," adds Marcus Zorn, CEO of BNP Paribas Real Estate Germany. On average, prime rents rose by 4.4% in around forty European markets in 2025.

In 2025, the European commercial real estate investment market confirmed its upward trend at almost €177 billion, an increase of 9% compared to 2024. This growth reflects the general return of investors on the one hand, but also their more targeted and selective investment strategies compared to pre-crisis comparisons. "The office investment market has benefited from this development and is now once again the strongest asset class with an increase of 13% and an investment volume of € 47 billion achieved in 2025. This momentum was supported in particular by large-volume transactions in Europe's main capitals," says Etienne Prongué.

Highlights in the fourth quarter were the sale of the striking "Can of Ham" office tower (30,000 m²) in London and the sale of a 40,000 m² building on Avenue Kléber in Paris for more than €700 million. A slow market recovery was observed across Europe in 2025. In the United Kingdom, the volume of office investments accelerated slightly to €11 billion (+2%). The UK is thus by far the largest market, followed by France and Germany, which recorded strong growth in office investments of plus 30% to €6.9 billion and 19% to €6.2 billion respectively. Italy reported an increase of 12% to €2.5 billion and the Netherlands 34% to €2.3 billion. At a low level, the investment volume in Spain doubled to €2 billion compared to the previous year.

The level of prime yields stabilised across countries in the second half of 2025. The inflation rate, which is within the target corridor of the European Central Bank, and the stable development of the key interest rate in the long term had a positive impact. The Bank of England's more expansionary monetary policy is also supporting the momentum in the office investment market.

The past quarters have also confirmed the ongoing polarization in the office investment markets. While the price level has stabilised in the most sought-after locations and in the segment of top assets in Europe's largest cities, price adjustments remain the order of the day, especially for old existing buildings in poorly connected locations.

"As can be seen in London and Paris, investor interest is returning to Europe's capitals and top cities, supported by improved financing conditions. Transaction momentum in the UK, France and Germany is likely to pick up as early as the first half of 2025. Demand for core assets should keep the pressure on prime yields high," says Etienne Prongué.