European prime office yields compress as investor confidence returns

Prime office yields in Europe have tightened, with a 5 basis point (bps) compression to an average of 4.96% in Q2 2025.

Savills European Office Investment report

This signals renewed investor confidence and interest in capitalizing on favorable pricing, according to research from Savills based on RCA data.
The most significant yield compression occurred in core Western European markets, 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 Paris CBD (-25 bps to 4.00%).
Offices remain the most actively traded sector.
Savills identifies Madrid and Milan as particularly attractive office markets due to their strong rental growth potential.
Capital raised for European real estate strategies surged by 118% in the first half of 2025 compared to the previous year, reaching €34 billion, as global investors look to increase their European holdings. 
While intra-regional buyers are expected to be the dominant force in the second half of the year, appetite for large acquisitions is also growing, with deals over €200 million accounting for 24% of total transaction volume (+15% year-over-year).
James Burke, director, Global Cross Border Investment at Savills, said: “Entering Q3 2025, there is an acceptance among buyers and sellers that pricing levels are becoming clearer and yields are beginning to compress for prime office stock across selected European geographies. Arguably one of the biggest changes in 2025 has been the increased competitiveness amongst lenders with a renewed desire to lend against well-located office product.”
Mike Barnes, director in Savills European Commercial Research team, added: “From an occupational perspective – and supporting investor demand - European office markets continue to improve. Vacancy rates made their first inward movement of the cycle, and tenant demand in H1 2025 was particularly strong in Germany and London’s West End with office take up rising by 18% and 29% year-on-year respectively. The European office development pipeline is also entering a ten year low, which is supporting further rental growth and will give investors additional confidence.”