Office leasing is being held back by large transactions. Prime rents are rising nonetheless

The volume of office leasing in 18 major European markets totaled 1.67 million m², a 16% and the same percentage below the five-year average. The main cause is a slowdown in large transactions; amid uncertain economic conditions, tenants are opting for smaller, high-quality spaces.

Despite weaker demand prime rents continue to rise — up 4.2% year-over-year in major markets, driven by the very limited supply of modern Class A space. Barcelona saw the sharpest increase (+10.3%), followed by Milan and Madrid (+7%) and central London (+6%). Meanwhile, average effective rents rose more slowly (+2.4%), widening the gap between prime and average rents—the market is becoming polarized.

The vacancy rate rose to 9.3% (34 markets, +25 basis points year-over-year), but the difference between locations is significant: in central business districts, it averages 5.6%, while outside these districts it stands at 11.2%. The rise in vacancy rates is driven more by weaker demand than by new construction, which remains subdued.

In Central Europe, Warsaw recorded 95,000 m² in leasing (-14%). Prime office rents stand at 360 euros/m²/year in both Prague and Warsaw, 336 euros in Budapest, and 264 euros in Bucharest. Regional markets are maintaining higher yields: the prime office yield is 5.00% in Prague and 6.25% in Warsaw—compared to 4.00% in London.

“The market is splitting into two speeds. Demand for the highest-quality spaces in prime locations is strong and rents are rising, while secondary spaces are harder to lease and require higher incentives. For Central Europe, this means that the yield gap with Western markets remains, making the region attractive.” — Lena Popová, Head of Office Agency, 108 Real Estate.

Data source: BNP Paribas Real Estate, Q1 2026.