Colliers – City Offices, Sep 2024

The European economy is slowly recovering after a stagnant year, with differences in performance among countries. Consumer spending may increase, but past rate hikes will continue to affect households for a while. The European Central Bank has cut policy rates to combat high inflation. The office occupier market is showing slow growth, with a preference for prime space over grade B and C space. Lease renewals have increased as companies reassess their office space needs. The European office market is stable, with rising vacancy rates but stable or increasing prime rents, especially in CBD locations. Investment in office spaces remains low due to high interest rates, dominated by domestic players. There are opportunities for retrofitting and upgrading offices for energy efficiency. Investor demand is mainly targeted towards core-plus and value-add opportunities, with a growing interest in flex office space. The outlook for 2025 is optimistic with accommodative monetary policies expected to support occupier growth and yield spreads. Further rate cuts are needed to stimulate market movement and increase capital values. The market is expected to see more core office deals in the coming years.