Tuesday, 8 September 2026
Milan’s office market is producing an apparent contradiction. Companies leased less space during the first half of 2026, yet rents for the city’s best buildings continued to climb and availability in its most desirable business districts remained exceptionally limited. Prime rents in the city are now generally assessed at around €830 to €850 per sq m annually by major property advisers, with the most exceptional central space capable of reaching higher levels. At the same time, total leasing during the first six months of the year fell substantially compared with previous periods.
Rather than signalling broad weakness, this combination points towards an increasingly divided office market. Modern, efficient buildings in central locations remain difficult to secure, while older properties elsewhere can face a very different level of demand. Approximately two-thirds of Milan’s first-half leasing involved higher-quality, environmentally efficient offices, suggesting that companies are not simply reducing their property requirements but becoming much more selective about where they locate employees and what standard of workplace they are willing to accept.
Hybrid working has strengthened this change. When employees spend fewer days in the office, companies have less reason to maintain large quantities of mediocre space simply to provide desks. The office increasingly needs to justify the journey to work. Location, public transport, restaurants, amenities, natural light, terraces, collaborative areas and overall building quality can therefore influence property decisions more heavily than they did when attendance was effectively compulsory five days a week.
The result is that Milan can simultaneously have a shortage and a surplus of offices. There is a shortage of modern space in the locations most sought after by large companies. At the same time, the city contains older buildings that may technically be available but do not meet occupiers’ current requirements. Adding those properties to vacancy statistics does little to solve the shortage experienced by companies searching for high-quality space.
This distinction is increasingly important for investors. A strong Milan office market no longer guarantees that every office building benefits equally from rising rents. Two properties separated by only a few kilometres can experience very different demand depending on their age, energy performance, accessibility and amenities. For owners of older buildings, the central question is becoming how much money must be invested before their properties can compete again.
The answer can involve substantial expenditure. Heating and cooling systems may need replacing, façades and insulation upgrading, lifts modernising and common areas redesigned. Floorplates may need adapting for more flexible working patterns, while terraces, bicycle facilities, showers, meeting areas and other amenities can be required to match newer developments. Energy performance adds another layer because large corporate occupiers increasingly have their own environmental targets and property requirements.
Refurbishment consequently becomes an investment calculation rather than simply a maintenance decision. Spending heavily on an older building makes sense when the resulting property can command sufficiently higher rents, achieve stronger occupancy and recover the capital through a higher valuation. Some buildings can make that transition successfully, particularly properties in strong central locations where the underlying location is difficult to reproduce.
Other buildings face a harder problem. Structural limitations can restrict ceiling heights, natural light, floorplate flexibility or mechanical systems. Extensive works may be technically possible but economically difficult to justify. If the finished building still cannot compete with newer offices, the owner risks spending substantial capital without achieving the necessary rental premium.
This creates the possibility of a growing group of properties caught between the prime and redevelopment markets. They may be too expensive to purchase purely as redevelopment opportunities but too outdated to compete effectively without significant additional investment. These buildings could become one of the most important challenges facing Milan’s office investment market over the next several years.
The difference should increasingly appear in valuations. Investors buying a modern, well-let building in a strong location can underwrite relatively predictable rental income and future demand. Older properties require much more complicated assumptions about refurbishment costs, leasing incentives, construction periods and future rents. A building requiring several years of work also exposes the investor to market conditions when the refurbishment is completed rather than when the property is acquired.
The strongest offices may therefore continue appreciating even while weaker properties struggle, creating an increasingly wide value gap inside the same city. Building quality could become almost as important as traditional location. Location itself is also being redefined, with Milan’s CBD and Porta Nuova remaining exceptionally attractive because they combine transport, amenities, corporate visibility and modern office stock. Limited availability in these areas strengthens landlords’ negotiating position and helps explain why prime rents can rise even when citywide leasing volumes decline.
The same conditions do not necessarily exist in peripheral submarkets. An older building outside the strongest locations may face both a quality disadvantage and a location disadvantage, making refurbishment more difficult to justify. For some properties, changing use could provide an alternative.
Milan continues to experience demand for housing, hotels and student accommodation, creating potential destinations for office buildings that no longer make economic sense in their existing form. Mixed-use redevelopment can also offer opportunities where sites are large enough. Conversion, however, is not a universal solution. Deep floorplates can make it difficult to provide sufficient natural light, structural layouts can restrict room configurations and planning requirements can add significant cost.
The economics therefore need to be considered property by property. Some obsolete offices will become successful residential or hospitality developments. Others will remain offices because conversion costs are too high, even if their competitive position within the office market continues to weaken.
Financing could accelerate the separation. Banks and other lenders increasingly need to consider the future competitiveness and environmental performance of properties securing their loans. A modern building with strong tenants can present a relatively straightforward financing proposition, while an older property requiring extensive capital expenditure creates additional risk.
Owners approaching refinancing may therefore face very different outcomes depending on the quality of their buildings. Strong assets could attract competing lenders, while weaker ones may require additional equity, refurbishment commitments or more conservative valuations. This could create acquisition opportunities for investors capable of undertaking complicated repositioning projects.
The consequences extend beyond individual transactions. If capital concentrates on the best buildings while older stock becomes progressively harder to finance, Milan could experience a gradual restructuring of its entire office inventory. Some buildings will undergo major renovation, others will be demolished and replaced, some will change use, while a remaining group may continue operating as lower-cost offices serving companies that prioritise affordability over premium specifications.
The approximately €830 to €850 per sq m rents achieved at the top of Milan’s office market therefore do not describe the value of office space across the city. They describe the price companies are prepared to pay for a scarce category of property that increasingly meets a specific combination of location, efficiency, amenities and environmental performance.
Falling overall take-up should also be interpreted carefully. Companies leasing less space does not necessarily mean they have become indifferent to offices. In some cases, they may simply be unable to find sufficient suitable space in the locations and buildings they want.
This is the contradiction at the heart of Milan’s current office market. The city does not necessarily need more offices in aggregate. It needs more offices capable of satisfying the standards increasingly demanded by occupiers.
For investors, that distinction changes the opportunity. The question is no longer simply whether Milan offices will experience rental growth. It is which buildings will participate in that growth and how much capital will be required to bring the rest back into competition. Milan’s next office cycle may therefore be defined less by vacancy than by obsolescence, with the winners being the buildings companies actively compete to occupy and the challenge being what happens to everything else.
Source: CIJ.World Research & Analysis Team
