Savills: investment volumes & confidence in office sector up

Investment volumes in the office sector increased by 18% to €41 billion in 2024 across Europe, according to Savills research, while Madrid, Amsterdam and Barcelona appear to be the most attractively priced offices.

“Savills latest investor sentiment survey shows improved confidence in the office sector, as many investors are increasingly willing to deploy beyond ‘beds and sheds’ and into both core and traditionally non-core geographies,” said James Burke, Director, global cross border investment, Savills.

“Following falling real estate values and rising equity prices since 2022, many multi-asset investors are now under-allocated to real estate which we expect will support increased bidding activity through the year,” he said.

Average prime European office yields moved in by 3bps to 4.92% during Q4 2024, according to Savills. The only inward movements were Oslo (-15 bps) to 4.50% and Stockholm (-10 bps) to 3.90% following strong domestic Nordic buyer demand, along with Bucharest moving (-30 bps) to 7.10%, as all other markets remained stable.

From a fair value perspective average prime European office yields remain in fairly priced territory, with a -7% capital value adjustment required, largely reflective of risk-free rates increasing during Q4 2024.

Madrid, Amsterdam and Barcelona appear most attractively priced on this metric, given rental growth prospects and pricing relative to historic levels.

The annual increase in European office investment volumes was observed across several markets, particularly Norway, Sweden, Italy and Spain, albeit from a historically low base, Savills data indicate.

“Occupier demand for European offices remains strong, with an 8% year on year increase in take up,” said Mike Barnes, director, European commercial research team, Savills. “Many occupiers have gone full circle in their remote working patterns and have found that they no longer have enough desk space, supporting an upsizing trend.

Occupiers are after good quality space but are not necessarily willing to pay headline rents, and as a result, they are now beginning to look three to four years ahead of their lease events given the shortage of good quality stock. Barnes added that “average European prime rents grew by 4.8% during 2024, well ahead of forecasts, which is presenting value-add investment opportunities for asset managers to bring good quality stock back to the market.”