European office occupiers are accelerating their real estate decisions to secure space in top buildings, as demand for high-quality offices surpasses supply in many major markets, according to the latest European Office Update from Cushman & Wakefield.
In the first half of 2026, leasing activity was 9% below the five-year average. However, demand concentrated on higher-quality assets. Grade A offices made up 51% of total take-up, while availability remained at a historic low of 3.3%. Europe’s development pipeline dropped to its lowest point since 2014.
Rental Growth and Market Performance
The supply shortage is fueling rental growth. From June 2025 to June 2026, prime rents rose by an average of 4.6%. 94% of European markets experienced growth or stability during this period.
Lisbon led with a 10.3% increase in prime rents. Amsterdam followed at 10%. London’s prime rents climbed by 7.7% in the City and 7.3% in the West End. Rotterdam (+16.7%), Birmingham (+14.3%), and Milan (+10.4%) saw even stronger growth, reflecting intense demand amid limited supply.
Investor Interest and Financing Conditions
Investor interest in the office sector is rebounding. European office investment reached €22 billion in the first half of 2026, just 1% below the same period in 2025, despite ongoing geopolitical uncertainty.
The market marked its third consecutive quarter with a transaction exceeding €500 million. Barclays’ €866 million purchase of 1 Churchill Place in London led this trend. Lenders are re-entering the market, with more financial institutions vying for office investment opportunities. This competition has led to favorable financing conditions, including narrower spreads and financing up to 60% of asset value, bolstering investor confidence.
Future Outlook and Market Pressure
The scarcity of high-quality office space may intensify in the coming years. Europe’s development pipeline shrank by 19% year-on-year to 8.4 million sqm, while speculative construction hit a decade-low.
In Lisbon and Birmingham, Grade A availability is a mere 0.7%. As companies vie for limited premium space in prime locations, both occupiers and investors are expected to prioritize top-tier assets, further pushing up prime rents.
Cushman & Wakefield forecasts sustained occupier demand, constrained development activity, and improving financing conditions to continue supporting the sector. Office space planning will remain essential as businesses adapt to these pressures.
