Madrid and Paris offers best value for prime office space

Savills reports that Madrid and Paris offer the best value for prime office space in Europe's central business districts. 

The international real estate advisor attributes this attractive pricing to expected rent increases and lower risk-free interest rates, making these markets particularly appealing to investors. 
Across Europe, average prime office yields tightened slightly by an average of 3 basis points to 4.89%, with London West End (-25 bps to 3.75%), Vienna (-15 bps to 4.85%), and Brussels (-5 bps to 4.75%) showing the most significant decreases.
James Burke, director, Global Cross Border Investment at Savills, says: “Contrary to what some observers might have expected given the current economic landscape, we are seeing continued motivation amongst both buyers and sellers in the European real estate market. Investors remain committed to executing the strategies they have put in place in order to take advantage of European markets that have repriced and which are seeing higher levels of prospective sales. In particular, we are observing a number of German and Spanish buyers targeting core European offices and nascent interest from North American private equity groups in the same asset class.”
Mike Barnes, director in Savills European commercial research team, says: “From an occupational perspective, European office markets continue to improve. Take up rose by over 8% year-on-year in 2024 and vacancy rates made their first inward movement of the cycle. “As a result, the IPF Consensus average five year European office rental growth forecasts have risen from 2.1% to 2.4% per annum as tenants continue to compete for the best space. There is a belief among investors that real rental growth prospects are back.”
Savills' European Office Value Analysis assesses the relative attractiveness of prime office markets in 20 European cities by comparing calculated yields with current market prices. The analysis covers London-City, Stockholm, Manchester, Lisbon, Oslo, Berlin, Paris CBD, Dublin, Amsterdam, La-Défense, Prague, Hamburg, Madrid, Barcelona, Munich, Brussels, Warsaw, Frankfurt, Milan, and Bucharest.