The U.K. is leading a recovery in Europe's long subdued office real estate market, with overall investment in the sector expected to pick up further in the second half of the year.
Britain recorded 4.1 billion euros worth of office transactions in the first six months of 2024, accounting for almost one-third of total European office deals, according to August data from international real estate firm Savills. But industry analysts now see activity gathering pace from September to year-end, as interest rates fall further and investors seek opportunities to capitalize on dislocated pricing.
Ireland and the Netherlands, which often closely follow the UK's trajectory, are now showing momentum, Savills said. Solid economic growth and higher office occupancy rates in Spain, Italy and Portugal also point to signs of strength. Meanwhile, a divide has emerged between the haves and the have nots, as tenants demand more modern and functional buildings to help lure their staff back to the workplace. As such, central business district, or CBD, properties with close proximity to public transport and local amenities are of high demand and can attract a diverse range of tenants.
Grade A offices — typically those that have been recently constructed or renovated — accounted for more than three-quarters of London's office leasing activity in the second quarter of this year, the highest level on record, according to an, Fidelity said that buildings' green credentials could now become the "single most important trait" in the new investment phase.