European office take up increases by 4% while development completions forecast to drop
According to Savills latest research, Q1 2025 European office take-up volumes reached 1.9m sq m, increasing by 4% year-on-year (yoy). Given a solid start to 2025, Savills forecasts a 5% yoy increase for the full year.
Over the past 12 months, Prague (+41%), Dublin (+29%) and London City (+26%) performed the strongest against the previous five-year take up average. German top 6 cities reported an average 13% yoy increase in Q1 2025 while Madrid remains resilient with four consecutive quarters of stronger performance.
Mike Barnes, director in Savills European commercial research team, says: “Average European office vacancy rates edged up by 10 bps during Q1 2025, reaching 8.4%, although this appears to be stabilising after several years of gradual increases. Vacancy is rising primarily in peripheral locations, while CBD locations remain considerably more resilient.”
Average prime office rents rose by 4.5% over the past twelve months, driven by supply-side shortages of best-in-class stock, according to the international real estate advisor. London West End, Cologne and Paris CBD saw increases of 21%, 21% and 18%, respectively.
The total volume of European office development completions rose by 5% yoy in 2024 to reach 3.8m sq m, although this was still 11% below the five year average. Savills forecasts that European office development completions will rise to 4.3m sq m during 2025, before falling to 3.1m sq m in 2026, which would reflect the lowest annual level of completions since 2017.
Mike Barnes adds: “The proportion of speculative deliveries as a percentage of total stock has dropped by half over the last three years to only 1.6%. Increasingly, new schemes are becoming let before completion, reducing the options available to occupiers and adding upward pressure on prime rents. Given a limited speculative pipeline, and the supply of prime stock being increasingly scarce, we believe this will support prime rental growth across major European markets over the next two to three years.”
Development has seen improved viability in selected core European office markets, supported by rental growth, and stabilising yields, says Savills. Outside these core markets, landlords are refurbishing their existing space in order to deliver good quality stock to the market, and ensure their buildings meet sustainability regulations.
James Burke, director, Global Cross Border Investment at Savills, says: “Investors continue to seek exposure to higher EPC rated office stock across European cities to maximise operational performance and adhere to fund requirements. CEE markets have the highest proportion of total stock of new offices developed over the last ten years, led by Bucharest (39%), Warsaw (37%), Budapest (32%) and Prague (27%). London City and Dublin’s office development has also been strong in recent years.”
To read the full report, please visit: https://www.savills.com/research_articles/255800/376999-0