European office Q2 take-up rises 10% year on year
Office attendance mandates supporting increased demand for space
Economic overview
The eurozone economy avoided a contraction during Q2, despite the higher base effects from tariff front-loading disappearing, as GDP rose by 0.1%. But resilience at face value masks broad-based softness. As we have previously discussed in Savills European office reports, we believe the office leasing market is generally more sheltered from the impact of tariffs, given the service-focused nature of demand.
At 15%, the European Union’s effective tariff rate with the United States is well above where it was at the start of the year, and growth is only expected to be marginally positive in the second half of the year, reflecting 1.1% in 2025, followed by 0.9% in 2026. Latest PMIs indicate strengthening economies in Italy and Spain, Germany is recovering, whilst the French economy is slowing. More focus will be on domestic growth and the impact on the services sector, stimulating demand for employment, as eurozone employer hiring expectations remain in contractionary territory.c
Eurozone inflation remained on target at 2% in July, with inflation flat across Germany, France and Italy. Coupled with lower GDP growth levels, the European Central Bank is now unlikely to cut interest rates more than once again in 2025.
Take-up and trends
European office take-up rose by 10% year-on-year (YoY) during Q2 2025, lifting H1 2025 take-up by 8% YoY, and we maintain our forecast for full-year take-up to rise by 5% YoY.
Compared to the previous five-year H1 average, take-up rose by 8%, driven by improvements in Frankfurt (+94%, given an increase in the number of >10,000 sq m lettings), Amsterdam (+37%), and London City (+35%). In Paris CBD, a shortage of supply continues to restrict leasing activity, with take-up down 15% YoY. Asking rents remain high in the French capital, which is beginning to hinder activity from companies whose financial situations have deteriorated in the last few months.
Increase in proportion of lease renewals
Leasing transactions are generally taking longer to execute than previously, given that occupiers are reviewing hybrid working strategies and facing elevated business costs. We are observing an increase in the proportion of lease renewals, due to a number of factors. Firstly, companies are aware that fitout costs have increased by over 50% since 2019 and will seek to extend existing terms rather than invest in new fitouts in new premises. Secondly, geopolitical concerns have wavered on decision-making over the last year, with companies less able to plan for longer time periods. And a shortage of prime alternatives in central locations has left occupiers with few options but to stay in existing space.
Service charge increases absorbed by tenants
Many landlords seeking to decarbonise office buildings with tenants in situ are increasing service charges in order to offset their capex. Service charges have risen by 20% in both Milan and Amsterdam over the last 12 months, with landlords and tenants facing earlier-stage discussions around future service charge increases.
M&A activity driving larger deal sizes through consolidation
M&A activity for European headquartered companies exceeded $140 billion during H1 2025. More companies are seeking to manage costs through consolidating their office footprint to one building and consequently, signing larger office leases.
Return to work mandates increasing
C-suites are becoming increasingly concerned about worker productivity levels, with an increasing number of corporates increasing office attendance mandates across Europe. In particular, consultancies, banks and investment managers have requested staff to attend the office a minimum of four days a week, clamping down on working from home. Generally, companies are not assigning which days employees should attend the office, and are therefore facing mid-week peaks in occupancy rates. Companies are curtailing any previous plans to reduce office footprint, with Savills analysis of Central London occupier requirements showing that 54% are seeking to upsize from existing space.
Feature: business sectors
Professional services drive expansion amid geopolitical uncertainty
In H1 2025, the Professional and Business Services sector reaffirmed its position as the principal engine of office leasing activity, accounting for 26% of European take-up. This marked a modest increase from 24% in H1 2024, reflecting the sector’s resilience, particularly among expanding counter-cyclical occupiers, including legal and accountancy, whose expansion has been supported by uncertainty around tariffs, the war in Ukraine and the Covid-19 pandemic. Several key markets registered pronounced growth in Professional and Business Services activity.
Frankfurt saw a significant surge, with the sector’s share climbing from 21% to 32%, underpinned by KPMG’s landmark 37,760 sq m lease. Amsterdam led in proportional terms, with the sector comprising 47% of total take-up, bolstered by UWV’s 44,000 sq m commitment at Bright Offices in Q2. Paris CBD also outperformed historical norms, with the sector capturing 25% of leasing activity, more than double its five-year average of 12%, underscoring a renewed confidence in prime urban locations.
Banking, Insurance, and Finance followed as the second most active sector, contributing 20% of total take-up. Although this marks a slight dip from 22% in H1 2024, the sector remains well above its 2020 benchmark of 16%, signalling sustained momentum. The widespread implementation of return-to-office mandates, coupled with strong profits, particularly among investment banks, has reinforced occupier demand. Noteworthy transactions included Commerzbank’s 67,000 sq m lease in Frankfurt. Paris CBD experienced a sharp rise in activity, with the sector’s share more than doubling YoY to reach 48%, led by J.P. Morgan’s 15,831 sq m deal in Q1. London City maintained its stronghold, with Banking, Insurance and Finance accounting for 35% of take-up, led by Squarepoint Capital’s 37,545 sq m transaction.
Technology ranked as the third most active sector, capturing 14% of leasing activity in H1 2025, a slight increase from 13% in the previous year. This modest recovery follows a period of contraction, with tech take-up having declined from 20% in 2022 amid rising interest rates and lower levels of corporate fundraising. However, green shoots of recovery are beginning to emerge. Dublin, a market with historically high exposure to tech occupiers, saw a dramatic resurgence, driven by Workday’s 38,663 sq m lease, a deal signalling renewed sectoral confidence. Prague also saw its tech take-up double YoY to 14%, reinforcing the narrative of a gradual rebound.
The Flexible Office sector saw a contraction in activity, falling to 4% in H1 2025 from 6% the previous year, reflecting a shift in landlord strategy, with more landlords providing managed space directly rather than through operators.
Analysis by deal size
The distribution of deal sizes provides a nuanced lens into shifting occupier strategies and market sentiment. Smaller leases, those under 250 sq m, saw their share rise from 19% in H1 2024 to 23% this year. This uptick suggests a growing preference for agility and footprint optimisation, particularly among firms navigating hybrid work models or uncertain economic conditions. Conversely, mid-sized transactions between 250 and 1,500 sq m declined from 20% to 16%, indicating a bifurcation in demand between highly flexible and large-scale occupiers. At the upper end of the spectrum, the share of deals exceeding 1,500 sq m remained broadly stable YoY, underscoring the continued relevance of larger commitments in core markets.
Sectoral analysis reveals distinct patterns in average deal size. The Energy sector led the field, with an average lease size of 2,458 sq m, indicative of its capital-intensive nature and long-term operational footprint. Flexible Offices followed closely at 2,268 sq m, reflecting that while overall take-up declined, individual transactions remain substantial, driven by enterprise-level demand for turnkey solutions.
Vacancy rates rise to 9.1%
Further prime rental growth expected over next 12 months
European office vacancy rates increased by an average of 20 basis points (bps) to 9.1% during Q2 2025*. Among the increases were Gothenburg (+190 bps to 10.6%), Frankfurt (+170 bps to 14.0%) and London WE (+110 bps to 8.1%). Riga, Dublin and La Défense are the office markets with the highest vacancy rates. However, there remains a high proportion of older, periphery stock across the market in need of refurbishment/ repurposing to alternative uses.
More generally, prime vacancy rates across the core European office markets are around the 3% mark. Development pipelines remain tight, as we approach a ten-year low for new office deliveries. For smaller lot sizes in non-prime buildings, landlords are fitting out to a Cat B standard in order to improve letability, with private, self-contained floors, built and managed by an operator.
Despite a marginal increase in vacancy rates, average European prime office rents rose by 6.1% YoY during Q2 2025. However, this was partly skewed upwards by London WE, which grew by 44% YoY, due to the higher number of deals completed in Mayfair/ St James during Q2 2025, compared to Q2 2024, so we expect the London WE prime office rental tone to normalise over the next quarter. Even excluding London WE from the analysis, average European prime rents rose by 4.5% YoY, indicating occupier demand for prime stock is intensifying, with the core markets of Cologne, Paris CBD, and Frankfurt office markets all recording >10% YoY rental growth.
Focusing more closely on core markets, the relationship between vacancy rates and prime rental growth has changed course over the last five years, as illustrated by the time series scatter plot, chart 6. Despite vacancy rates rising since 2019, over the last twelve months, core prime rents have increased at their fastest rate since 2007, with no sign of dropping off in the last couple of quarters.
Clearly, location has become more important as occupiers shift to more central locations with better connectivity. Similarly, occupiers seek better quality office stock in these locations to reduce their carbon emissions and seek to attract and retain employees. Occupiers are less willing to sacrifice either of these two factors than they were previously, with more occupiers competing for less prime space.
Outlook
Occupiers are still adjusting to a higher cost environment and navigating remote working policies, which is extending occupational decision-making time frames. However, take-up has returned to only 10% below the pre-pandemic levels, and we expect to see a higher number of larger deals signed as a result, particularly from banks, investment managers and professional services companies. The depth of occupier demand is resilient, and there are more larger requirements than at this time last year across the majority of European markets – they are simply taking longer to satisfy than in previous years.
Occupiers who are reviewing their options are being forced into extending existing terms rather than signing for new space, with many who have outgrown their existing space spilling over into flex offices. Landlords are therefore increasingly reaping the benefits of providing flex space as part of their existing schemes. Prime rents must rise further for developers to start delivering new stock speculatively across most European markets, and we expect further rental growth outperformance over the next twelve months.