Demand for European office market has been characterised by a focus on location and quality over the last five years. In 2025, a 52% share of take-up was of Grade A quality – the highest share on record and the first year that this segment of the market achieved a majority proportion.
At the same time, 67% of 2025 take-up occurred in core locations within key markets which was the second highest share on record, behind only the 69% reported a year previous in 2024. Both of these figures look to be on an upward trajectory – provided supply can keep pace.
While overall levels of availability across Europe are elevated at 9.7%, this figure rapidly decreases as we focus in on the in-demand segments of the market. Grade A space reports a vacancy rate of just 3.3%, declining down further to 2.8% for Grade A supply in core locations following two consecutive quarters of decline.
This decline is in part due to the strength of demand for this good quality, well-located stock – but its also being driven by the lack of new space coming to market. Looking ahead, these market dynamics are likely to worsen.
We can see this through the development pipeline. Over the three years from 2026 to 2028, a total of 6.5 million sqm of new space is expected to be delivered to the market through new developments.
Assuming the annual Grade A take-up averaged from 2023 to 2025 continues over the next three years, this same 2026 to 2028 period would see 15.4 million sqm of Grade A space required to satisfy demand. Comparing the supply picture to the projected demand, a supply shortfall of 8.9 million sqm is expected to materialise.
As of Q1 2026, there is 6.3 million sqm of existing Grade A supply across key European markets. This means that, even in a perfect market where all existing supply was utilised, there would remain a 2.6 million sqm deficit in the volume of Grade A space available by 2028.
High material and labour prices, elevated borrowing costs and structural shifts in the office market have squeezed development viability – an issue felt across markets as well as across commercial real estate as a whole. Current projections suggest these factors are unlikely to change materially over the medium-term future.
Different markets are nonetheless at different points along this shrinking supply trajectory. It is the markets where new development is expected to fall significantly short of anticipated demand where this trend is likely to be most impactful.
As a result, for occupiers who are unable to find the right space at the right price in the right location, they may choose to renew or regear their existing lease.
For those who have to move, some will look to pre-let the remaining forthcoming spaces, pushing competition and resulting in upward pressure on rental growth. Others will be priced out or ‘spaced out’ of the market, unable to find the quantum they require at a price they can afford. These occupiers will be pushed to compromise – either on location or quality.
Evidence from our recent UK release, The Office Equation, suggests that both things can be true. Data from Central London over the last 20 years shows that larger occupiers are more likely to compromise on location, enticed by the larger floorplates, higher availability and stronger incentives that non-core submarkets can provide.
Small and medium companies are more likely to remain in core locations, compromising instead on quality and shifting from a Grade A building into a Grade A- or Grade B+ space. This enables them to continue to benefit from the agglomeration, clustering and talent benefits being in the heart of a city often brings.
Although this trend – like many in real estate – can appear slow moving, it is one that is certainly influencing occupier decision-making in real time.
For investors and developers, this presents an immediate opportunity to deliver new space to support tenant expansion in the core markets, with high impact, targeted refurbishments offering a quick-to-market solution that is well-suited to the current development landscape.
For occupiers, these trends mean acting on location requirements sooner rather than later is more important than ever.
Why it Matters
The Grade A office supply-demand imbalance taking shape across European markets is not a distant or theoretical risk — it is already reshaping how occupiers and investors approach decisions, and the data suggests the pressure will intensify through 2028.
For European office occupiers of all sizes, the implication is practical and immediate: real estate strategies around requirements, relocations and renewals need to be prioritised well ahead of lease events. The pool of available Grade A space in core markets is contracting, and the development pipeline will not replenish it at the pace demand requires. Those who act early retain meaningful choice; those who delay will face harder trade-offs — between location and quality, between pre-letting and compromise, between the space they need and the space they can secure.
For investors and developers in European office markets, the same supply constraints are pointing toward a focused and time-sensitive opportunity. With new development limited by cost and viability pressures that are unlikely to ease materially in the near term, high-impact targeted refurbishments offer the most viable quick-to-market solution — one well-suited to the current development landscape and well-positioned to capture the occupier demand that new supply alone cannot meet.
