European office market sees improving investor confidence

According to Savills' latest research, investor confidence in the European office sector is on the rise, prioritising asset quality over specific sectors, and focusing on properties with strong income returns. 

James Burke - Savills

Investors are increasingly prioritising the quality of assets over specific sectors, focusing on properties that promise strong income returns. 
A Q4 2025 investor sentiment survey by INREV highlights a preference for Southern European markets, with Germany also showing significantly improved sentiment. Discussions around office attendance and potential obsolescence have diminished compared to one or two years ago, and buyers are now more inclined to finalise transactions.
In Q4 2025, the average prime European office yields remained steady at 4.9%. Yields compressed by 10 basis points in Munich, Hamburg, and Prague, while Bucharest saw an increase of 20 basis points.
The European commercial property market is expected to remain highly competitive through 2026, especially for large, high-quality office buildings. Lenders are offering attractive terms, as demonstrated by Valesco securing an €80 mln loan for a €200 mln Milan office acquisition at a record-low debt margin. This competitive lending environment is fuelling an increase in large transactions, with preliminary data showing a 23% year-over-year rise in single-asset European office deals exceeding €100 mln in 2025.
The share of European office investment from cross-border buyers increased from 33% in 2024 to 41% in 2025. European insurance companies are targeting "core-plus" properties, while French collective real estate investment vehicles (SCPIs) prefer higher-yielding office assets. Private investors, who have been active recently, are expected to continue acquiring core assets in 2026.
The occupational market is showing improved fundamentals. Tenants are increasingly renewing leases due to a scarcity of prime office space and the rising costs of fitting out new offices (up 67% in five years). This allows landlords to secure higher rents upon renewal, driving real rental growth and attracting more buyers to prime properties. With limited new development, prime rents are projected to increase by 3.7% in 2026. Private equity firms are capitalising on this by acquiring, renovating, and selling older buildings in central business districts to capture rental uplift.
Overall, with investors becoming more open to different sectors, minor yield compression is anticipated for prime CBD assets in select markets during 2026. This trend is supported by attractive pricing, robust economic growth, and a limited supply of prime properties.
James Burke, director, Global Cross Border Investment at Savills, commented: "Investor sentiment is turning, and we are already, for example, seeing a notable uptick in interest in Germany, underpinned by expectations of a rebounding economy in 2026. Accretive debt is drawing in a deeper pool of investors, and we anticipate that we will see a further recovery of investment volumes in Europe this year.”