Occupiers across Europe are increasingly being forced to plan further ahead to secure the right office space, as demand for high-quality buildings continues to outpace supply in many of the region’s leading markets, according to Cushman & Wakefield’s latest European Office Update.
The report shows that while overall leasing activity in H1 2026 was 9% below the five-year first-half average, occupier demand remains firmly concentrated on the best buildings, with Grade A space accounting for 51% of all leasing activity. At the same time, Grade A vacancy remains exceptionally tight at just 3.3%, while the European development pipeline has fallen to its lowest level since 2014.
This imbalance between demand and supply is supporting rental growth across the region. Prime office rents increased by 4.6% in the year to Q2 2026, with 94% of markets recording either positive or stable rental performance. Some of the strongest increases were recorded in supply-constrained markets such as Birmingham, where prime rents rose 14.3%, alongside Rotterdam (16.7%), Milan (10.4%), Lisbon (10.3%) and Amsterdam (10.0%). Meanwhile, London continued to record healthy growth, with rents increasing 7.7% in the City and 7.3% in the West End.
Javier Bernades, Head of Offices, EMEA at Cushman & Wakefield, said: “The office market continues to demonstrate remarkable resilience. Businesses remain highly focused on securing workplaces highest-quality buildings in the strongest locations. With the development pipeline shrinking and Grade A availability remaining extremely limited, occupiers need to anticipate their real estate strategies much earlier than in previous cycles to ensure they can secure the right product for their long-term needs.”
The report highlights that the shortage of premium office space is expected to intensify over the coming years. The development pipeline has contracted by 19% year-on-year to 8.4 million sqm, while speculative construction activity has fallen to its lowest level in more than a decade. Availability of Grade A space is already extremely limited in several major markets, dropping as low as 0.7% in Birmingham and Lisbon.
Occupier demand remains resilient in a number of key cities despite wider economic uncertainty. Vienna reported the strongest year-on-year gains at 64%. Dublin recorded a 16% increase in leasing activity over the last 12 months and outperformed its five-year average by 32%, while Berlin (22%), Bratislava (30%) and Barcelona (34%) also recorded growth in leasing activity.
At the same time, investors are showing renewed interest in the office sector. European office investment volumes reached €22 billion during the first half of 2026, just 1% below the same period last year, despite ongoing geopolitical uncertainty. The market also recorded a third consecutive quarter featuring a transaction above €500 million, including Barclays’ €866 million owner-occupier acquisition of 1 Churchill Place in London.
The return of lenders to the market is further underpinning investment activity. Cushman & Wakefield reports a growing number of lenders competing for office opportunities, with credit spreads tightening and financing terms becoming increasingly attractive for borrowers. Financing at up to 60% loan-to-value is beginning to re-emerge as confidence improves.
Kiran Patel, Head of Office Sector Research, EMEA at Cushman & Wakefield, said: “We are seeing investors return to the office sector because the occupational story remains compelling. Demand for high-quality space continues to prove resilient, rental growth is being driven by genuine supply constraints and the future development pipeline is becoming increasingly limited. Alongside this, the debt market has become more competitive, with lenders returning to the sector and pricing improving for the strongest assets. Together, these factors are creating renewed confidence in European offices among investors.”
Looking ahead, Cushman & Wakefield expects resilient occupier demand, constrained development activity and improving financing conditions to continue supporting the sector. As businesses compete for an increasingly limited pool of best-in-class office space, both occupiers and investors are likely to remain focused on high-quality assets in the region's strongest locations, pushing up headline rents.
