There is a paradox at the heart of Europe’s office market in 2026: companies are leasing less space overall, yet the best buildings have rarely been more expensive to occupy. New research from Savills, published this week, paints a picture of a market splitting sharply along the fault line of quality and it has real consequences for how growing businesses plan their next move.
Average office vacancy across Europe held steady at 9.4% in the second quarter of 2026. That headline figure, though, disguises a much tighter story at the top. Vacancy in central business districts averaged just 4.9%, and for prime CBD space it narrowed to roughly 2%. In other words, the office that most occupiers say they want central, modern, well-connected, efficient is becoming genuinely scarce.
Take-up is down, but deals are taking longer
European office take-up actually declined 6% year on year in the first half of 2026 and sat 3% below the five-year average. That softness might look like bad news for landlords, but Savills attributes much of it to deals simply taking longer to complete rather than demand falling away. Occupiers are more deliberate, more discerning, and less willing to compromise on the buildings they sign for.
That selectiveness is the flip side of hybrid working. With desks occupied fewer days a week, every square metre has to earn its place. Companies are shrinking their footprints in absolute terms while raising the bar on the space they do keep better amenity, better sustainability credentials, better location. The result is a flight to quality that is now visible in the rent rolls.
Tech is back and driving the cycle
The standout demand story of the half was technology. The sector accounted for 22% of European office take-up in H1 2026, up sharply from 14% in 2025. Expanding AI firms and renewed activity from established tech players are doing much of the heavy lifting, echoing the wave of AI-led office demand that has reshaped leasing in several major cities over the past year.
Professional and business services remained the single largest source of demand at 24%, edging down from 26% a year earlier. Finance, banking and insurance slipped more noticeably, from 21% to 16% a reminder that the recovery is not evenly distributed across sectors.
The cities pulling ahead
A handful of markets stand out for leasing activity well above their historical norms. Dublin came in 63% above its five-year first-half average, followed by London’s West End at 36%, Berlin at 30% and Munich at 28%. These are precisely the markets where supply constraints and deep talent pools reinforce each other.
Prime European office rents rose 3.7% in the year through Q2 2026. Munich led the field at 11%, while Frankfurt and Warsaw each recorded 10% growth. The common thread is a shortage of new, high-spec buildings arriving to compete with existing stock.
A pipeline at its weakest in a decade
This is where the supply side of the story becomes decisive. Savills reports that Europe’s new-build office pipeline is at its weakest in more than a decade. Construction completions are forecast to fall materially through 2026, leaving landlords of existing prime buildings with fewer new competitors and tenants with fewer genuine prime options.
For occupiers, the message is increasingly clear: waiting is not a cost-free strategy. The best spaces are unlikely to become more abundant in the near term, and the rent gap between prime and secondary stock is widening. Businesses that know they will need a high-quality presence in a core location over the next two to three years may find that acting early and locking in terms is materially cheaper than holding out.
What it means for flexible and virtual strategies
For many smaller and mid-sized businesses, signing a long prime lease is still not the right answer. The same scarcity that is pushing rents up also makes flexibility more valuable. This is where the flexible office and virtual office market earns its keep: a professional business address in a sought-after CBD, on-demand meeting rooms, and coworking day-passes let companies plant a flag in tight markets without committing to space they may not fully use.
The Savills data quietly reinforces the case for a hybrid real-estate strategy. Secure presence where it matters; stay light where you can. As prime supply stays thin and rents keep climbing, that blend looks less like a compromise and more like the rational default.
