Office leasing activity across Europe rose by 10% in the second quarter of 2025 compared to the same period last year, signaling a continued rebound in occupier demand despite economic uncertainty and rising vacancy levels, according to Savillsโ latest report.ย
The total take-up for the first half of the year is now 8% above 2024 figures and ahead of the five-year average. The trend is being driven by a combination of factors including the return of in-person work mandates, ongoing consolidation among large firms, and particularly strong leasing activity in the professional services and finance sectors.
Economic Environment: Sluggish Growth, Stable Inflation
Despite the eurozone narrowly avoiding economic contraction in Q2 โ with GDP growing a modest 0.1% โ underlying conditions remain fragile. Inflation held at the European Central Bankโs 2% target in July, but subdued hiring sentiment and geopolitical pressures continue to weigh on business confidence.ย
With little room for further interest rate cuts this year, the economic outlook is cautiously optimistic, especially for service-driven sectors less impacted by global trade friction.
Leasing Patterns: Renewals Rise as Occupiers Delay Big Moves
The second quarter saw a noticeable rise in lease renewals, as many companies opted to stay put rather than take on the high costs of moving or fitting out new space.ย
The cost of office fit-outs has surged more than 50% since 2019, prompting firms to extend existing leases, particularly where supply of prime alternatives remains tight.
Consolidation among large firms, especially through mergers and acquisitions, has also contributed to increased lease sizes. Many occupiers are now prioritizing central, high-quality locations as part of broader workplace strategies focused on attracting talent and improving sustainability performance.
Sector Performance: Professional Services Take the Lead
Professional and business services firms accounted for over a quarter of all leasing activity in H1 2025 โ up from 24% last year โ fueled by steady expansion among legal and accountancy firms. Frankfurt, Amsterdam, and Paris all reported strong demand from this sector.ย
Financial services followed closely, representing 20% of all take-up. While slightly below last yearโs figure, the sector remains robust, helped by consistent profitability and a push by major institutions to bring staff back into the office more regularly.ย
Technology firms showed tentative signs of recovery, with their share of take-up rising slightly to 14% after two years of decline.ย
Meanwhile, flexible office operators lost ground, accounting for just 4% of activity, down from 6% a year ago, as landlords increasingly opt to manage flexible space offerings themselves.
Return-to-Office Mandates Fuel Demand
A growing number of employers โ especially in finance and consulting โ are mandating more frequent in-office attendance, typically requiring four days per week. While workers still have flexibility over which days they come in, this has created peak occupancy mid-week and reduced momentum behind office downsizing plans. In fact, in Central London, more than half of occupiers are now actively seeking to increase their office space.
Vacancy Rates Climb, but Prime Rents Keep Rising
Despite stronger demand, the average vacancy rate for European offices edged up to 9.1% in Q2, with cities like Frankfurt and Gothenburg seeing the sharpest increases. Older buildings and space on the urban fringe continue to struggle, while prime space in central locations remains scarce and highly sought-after.
This imbalance is reflected in rental trends. Prime office rents across Europe rose by more than 6% year-on-year. Londonโs West End stood out with a 44% surge, although this was largely due to a cluster of high-value deals in Mayfair and St Jamesโs. Even excluding London, rents in key cities like Cologne, Paris, and Frankfurt showed double-digit annual growth.
Landlords are increasingly investing in upgrades โ especially to improve sustainability โ with service charges rising as a result. In Milan and Amsterdam, tenants are now paying around 20% more than a year ago in service fees.
Looking Ahead: Larger Deals Expected Despite Caution
While occupiers continue to navigate cost pressures and progressing hybrid work policies, the underlying demand for office space remains resilient. Deal-making is taking longer, but more large-scale requirements are now in play than this time last year.
As speculative development remains constrained, landlords who offer fitted or flexible space are better positioned to capture demand. Prime rents are expected to climb further, particularly in undersupplied central markets, potentially unlocking new development activity in 2026 and beyond.
