Prime office rents rise while yields stabilise across Europe, Catella reports

Catella’s latest Office Market Overview for Q4 2025 indicates continued moderate rental growth in Europe’s prime office segment alongside broadly stabilising yields, suggesting that the repricing cycle for core CBD assets may be nearing completion.

The research covers 27 cities across 16 European countries. Average prime office rents reached €48.35 per sqm per month, representing annual growth of approximately 3.9%. Demand for high-quality, centrally located space remained the main driver, reflecting the ongoing “flight to quality” trend.

London’s West End remained the most expensive office market in Europe, with prime rents at €174.00 per sqm per month. Among the strongest year-on-year rental increases were Frankfurt (+9.6%), Rotterdam (+9.1%) and Stockholm (+9.1%). Markets including Dublin and Luxembourg recorded stable rental levels, and no city in the survey reported a decline in prime rents.

Prime yields averaged 4.80% and showed limited quarter-on-quarter movement. Catella notes that yields remain relatively elevated due to the impact of higher interest rates, increased vacancy levels, and structural shifts in office demand linked to hybrid working. However, the recent stability suggests that valuation adjustments in many core markets may largely be complete.

Katharina Ganschow, Research Manager at Catella Investment Management, said that continued rental growth in the prime segment could gradually support capital values, provided financing conditions continue to improve.

The report also highlights growing divergence between office and residential markets, which is influencing investor strategies. While prime office capital values have generally declined across many markets since 2020, London’s West End has been an exception, recording approximately 34% growth over the period. In contrast, residential values in many cities have continued to rise amid structural housing shortages.

This widening gap is increasing interest in office-to-residential conversions. Catella identifies Madrid, Berlin, Dublin, Warsaw and Rotterdam as markets with notable potential for such repositioning. However, the firm cautions that feasibility depends heavily on asset-specific factors including building design, technical standards and planning regulations. It adds that execution risk remains relatively high, making careful asset selection and clearly defined capital expenditure requirements essential.