According to Savills, average prime yields for office properties in Europe fell by 5 basis points (bps) in the second quarter of 2025. This means that offices remain the most heavily traded sector in the region.
The analysis, based on data from RCA, shows that investors are regaining confidence in the office sector and taking advantage of attractive price levels to enter the market. On average, European prime office yields fell to 4.96% in the second quarter. Yield compression was particularly pronounced in the core markets of Western Europe – including Madrid (-25 bps to 4.65%), Barcelona (-25 bps to 4.65%), Amsterdam (-20 bps to 4.40%), Munich (-10 bps to 4.10%) and the Paris CBD (-25 bps to 4.00%). According to Savills, Madrid and Milan are currently among the most attractive office markets in Europe from a valuation point of view – mainly due to their positive rental development prospects.
Savills also reports that capital raised for European real estate strategies increased by 118% to €34 billion in the first half of 2025 compared to the same period last year. While global investors are increasingly expanding their European commitments, the market is likely to be dominated by regional buyer groups in the second half of 2025. Interest in large-volume transactions is also increasing again: the share of transactions over EUR 200 million rose to 24% of the total volume – a significant increase compared to 15% in the previous year.
"As we enter the third quarter of 2025, there is an increasing consensus on price levels in the market – at the same time, the first yield compressions are becoming apparent in core properties in selected European markets. One of the most notable developments in 2025 is the increased competition among lenders looking to invest more in centrally located office properties again," comments James Burke, Director, Global Cross Border Investment at Savills.
Mike Barnes, Director in Savills' European Commercial Research Team, adds:
"The European office markets are also developing positively on the user side, supporting investor demand. For the first time since the beginning of the current cycle, the vacancy rate has fallen. In the first half of 2025, take-up increased in Germany and London's West End, among others, with office lettings up 18% and 29% year-on-year, respectively. At the same time, the new construction pipeline in Europe is at a ten-year low – another driver of rental growth and a confidence factor for investors."
