Catella has published its office market overview Q4/2025, which covers 27 cities in 16 European countries. Prime rents for office space in Europe continued to rise moderately in the fourth quarter of 2025, while prime yields remained broadly stable compared to the sharp adjustments of the previous quarters. This indicates a progressive market stabilisation for high-quality, centrally located office properties after the revaluation phase of recent years.
Average prime rents reached EUR 48.35 per m² per month, which corresponds to an average annual growth of around +3.9%. This underlines the continuing rental growth in the premium segment, driven by the continued "flight to quality" towards high-quality properties in central locations. London (West End) remained the most expensive market at EUR 174.00 per m². Strong year-on-year rent increases were recorded in Frankfurt (+9.6%), Rotterdam (+9.1%) and Stockholm (+9.1%), while markets such as Dublin and Luxembourg showed stable rents. Overall, none of the cities showed declines in prime rents.
Average prime yields stood at 4.80% and thus remained elevated, not only due to interest rate levels, but also as a result of structural changes such as higher vacancy rates, lower post-pandemic yields and hybrid working models. The resulting dampened demand for space has weakened the propensity of investors; compared to the previous quarter, however, yields remained broadly stable with only minor movements. This suggests that the valuation adjustment process is largely complete in many key markets.
"If rental growth in the top segment continues, this is likely to lead to moderate upward pressure on the capital values of prime office properties – provided that financing conditions continue to stabilize," says Katharina Ganschow, Research Manager at Catella Investment Management GmbH (CIM).
Conversion of office to residential properties
The increasing polarisation between office and residential real estate markets is shaping investment strategies in many European cities. While the capital values of prime office properties have fallen in numerous markets since 2020, London (West End) is an exception, recording +34% growth in capital values over this period. Comparable growth rates can only be observed in other markets in the residential segment, where values continue to rise significantly due to structural supply bottlenecks. The analysis shows pronounced differences between prime office properties and average residential prices, which would be even more pronounced if equivalent quality segments were compared, thus underlining the potential for conversions from office to residential space.
Against this background, cities such as Madrid, Berlin, Dublin, Warsaw and Rotterdam have a particularly high market potential for office to residential conversions. However, this potential cannot be transferred to all properties across the board. In addition to economic factors, building characteristics, technical standards as well as construction planning and usage regulations play a decisive role in feasibility. In particular, properties that were originally designed with a certain flexibility of use benefit. The implementation risk is higher than with other strategies – careful asset selection and clearly defined CapEx requirements are therefore crucial.
