The Pan-European Office Market: Trends and Insights

By Ben Tijhuis, Martijn Vlasveld and Robbert Bakhuijsen

The Pan-European office market is transforming, driven by evolving work models, a flight to quality and sustainable ambitions. Stabilizing values present opportunities for investors to achieve above average returns on both the short- and longer-term strategies, especially for mid-size offices on high quality locations in the city centres.

As the values of prime offices have stabilized after decreases of 
10-30% since the peak in 20221, office values became attractive. At Edmond de Rothschild Real Estate Investment Management, we observe three main trends:

• Working from home has been integrated in the way of working and enhances ‘return to the office’, to drive corporate culture, maximize cooperation and knowledge sharing.
• The request for ESG compliant offices has evolved into a demand for energy efficient offices, which are an inspiring places to work.
• Corporates take ‘a flight to quality’ and look for well-located, amenity-rich, energy efficient, high-quality offices.

The hybrid office work models are reshaping occupier demand, favouring flexible, mid-sized offices with collaborative spaces. Multi-tenant buildings with modern amenities are increasingly preferred, while occupier demand for large office towers declines. Sustainability and wellbeing are critical, as energy-efficient properties attract premium tenants, stronger rental growth and, thus, superior risk-adjusted re
turns. Therefore, retrofitting older buildings to meet energy efficiency standards and make them an inspiring place to work, enhances both environmental and financial performance.

In this paper, we describe the characteristics of the office market, its key growth drivers and specifically our investment conviction for high quality, well-located offices.