European Office Markets in the First Half of 2026: Lower Demand, but Rising Prime Rents and Deepening Polarization

Demand for office space in major European cities fell by 9% year-over-year in the first half of 2026, mainly due to a lack of large transactions. Prime rents, however, continue to rise—by 6.2% year-over-year in major markets—driven by a shortage of high-quality Class A space. The vacancy rate rose to 9.6%, but remains highly polarized: prime locations in city centers are nearly full, while space is becoming available on the outskirts. This is according to the report Office Market Europe Q2 2026 by the research team at BNP Paribas Real Estate, an alliance partner of 108 REAL ESTATE for Central and Southeastern Europe.

Demand: Tenants Prioritize Quality Over Quantity

The total volume of office space leases across 18 major European markets reached 3.64 million m², which is 9% lower year-over-year and 9% below the five-year average. The main reason is a lack of large transactions—in a challenging economic environment, tenants remain cautious and prioritize smaller, best-in-class spaces in prime locations.

However, performance varied significantly from market to market:

• Growth was seen in: Berlin (373,000 m², +51%), Munich (354,000 m², +38%), Barcelona (201,000 m², +35%), Warsaw (217,000 m², +25%), Rome (+24%), Brussels (144,000 m², +12%).
• Declines were seen in: Frankfurt (173,000 m², −53%), Madrid (198,000 m², −29%), Milan (−29%), central Paris (628,000 m², −13%), central London (531,000 m², −7%).

The six major German markets remained stable overall (1.25 million m², −3%). In Paris, the segment of large properties over 5,000 m² was hit hardest, with activity falling by 48%. In London, by contrast, the West End saw a revival, with leases increasing by 39% year-over-year.

The CEE region was led by Warsaw, which, with year-over-year growth of 25%, ranked among Europe’s strongest markets and remained in line with its five-year average.

Among the most significant transactions of the first half of the year were: Proximus (Brussels, 38,200 m²), Airbus Defense & Space (Greater Paris, 36,800 m²), the German Federal Ministry (Berlin, 31,000 m²), Inditex (Barcelona, 30,000 m²), and Visa Europe (Warsaw, 17,300 m²).

Rents: Prime rents continue to rise, while the gap with average rents is widening

Prime rents in major European markets rose year-over-year by 6.2%, while average net effective rents rose by only 1.0%. This divergence in trends points to growing market polarization: prime spaces are holding their prices due to strong demand and a shortage of Class A space, while in secondary locations, pressure for incentives is mounting.

Rents rose the fastest in Barcelona (+23%), Milan (+13%), and central Paris, Hamburg, and Munich (all +8%). However, the latest data suggest that the pace of growth is beginning to slow in some markets.

For comparison, prime rents in the region according to a report by BNP Paribas Real Estate (€/m²/year): Prague 360, Warsaw 360, Vienna 354, Budapest 336, Bucharest 264.

Vacancy rates: rising, but extremely uneven

The European vacancy rate reached 9.6% at the end of June 2026 9.6% (+40 basis points year-over-year, across 28 markets). This increase is driven more by subdued demand than by new construction—development activity is limited, and a large portion of planned projects is already pre-leased.

At the same time, the market remains highly segmented: the average vacancy rate in city centers (CBDs) is only 5.7%, but outside city centers it stands at 12.2%. In the prime CBDs, supply is minimal—Barcelona CBD 1.0%, Rome CBD 1.1%, Milan CBD 3.1%, Munich CBD 3.5%. Declines in vacancy rates were recorded in Barcelona, Madrid, Warsaw, Dublin, and central London.

What to take away from this

The “flight to quality” trend—tenants’ preference for quality and prime locations—is crucial for the Central and Southeastern European region. It signifies stable demand for modern, easily accessible buildings and a growing divide between top-tier and secondary spaces—a trend that tenants, investors, and owners alike will need to take into account.

European data confirms what we’re seeing here in our region: companies aren’t looking for more square meters; they’re looking for better square meters. High-quality space in a good location is in short supply, and its value will continue to rise, while older buildings outside city centers will have to compete for tenants with incentives.” Jakub Holec, CEO, 108 REAL ESTATE.