Colliers: Capital flowing beyond traditional hubs, demand disperses

A new analysis from Colliers indicates a growing disconnect between capital allocation and emerging occupier demand in Europe's financial services real estate market.

Andrew Hallissey

As firms increasingly prioritise AI integration, talent acquisition, and cost efficiency, the long-standing dominance of major gateway cities is beginning to wane, leading to a more fragmented market.

While London and Paris remain significant anchors in terms of sheer scale, forward-looking indicators of demand are increasingly found in smaller, highly productive markets and cities attracting substantial venture capital.

Cities like Zurich, Geneva, and Luxembourg City are demonstrating exceptionally high financial services output relative to their workforce size. For investors, this translates into robust underlying demand for office assets, even in smaller markets, with higher value creation per employee supporting rental stability and efficient space utilisation. In these locations, occupiers are more inclined to prioritise quality and functionality over mere scale, driving demand for premium, well-specified buildings.

Concurrently, venture capital flows are reshaping the competitive landscape. While established global centres continue to attract the largest amounts of capital, the most rapid growth is observed in a wider array of locations, including Bucharest and Istanbul. These markets are appealing to fintech and digital-first companies that are less reliant on traditional financial ecosystems and more focused on accessing skilled labour and reducing operational costs.

Office demand is no longer solely dictated by proximity to established financial clusters but by the availability of specific skills and the cost of deploying them. Consequently, occupiers are moving towards more distributed real estate portfolios, aligning office locations with particular functions rather rather than maintaining extensive, centralized footprints.

Andrew Hallissey, CEO, Global Occupier Services at Colliers, said: “Financial services leaders are facing more choice, and consequently more complexity, than ever when deciding where to locate their people. With AI changing skill requirements and work no longer concentrated in a handful of hubs, it’s important for organisations to futureproof their workforce decisions to support near-term needs and long-term resilience.”

Workplace strategy is becoming a central factor in real estate decisions. Headquarters in major cities are increasingly designed for collaboration, client interaction, and fostering company culture. In contrast, smaller offices in secondary markets are focusing on execution, technical roles, and cost-effective operations.

The outcome is a market where demand is less concentrated, more driven by specific functions, and increasingly responsive to labour market dynamics. Investors who continue to focus solely on scale risk misjudge both opportunities and risks.