Monday, 21 September 2026
Luxembourg’s office sector has entered an unusual phase in 2026. Companies are signing fewer leases and generally committing to smaller spaces, but this decline in activity has not created an abundance of offices. Instead, businesses searching for modern premises in the best locations continue to face restricted choice and rising rental costs.
During the first half of 2026, Cushman & Wakefield measured approximately 59,500 sqm of office take-up across 77 transactions. This compares with around 110,000 sqm normally recorded during the first six months of the year based on the previous decade. JLL, applying its own methodology, recorded 51,789 sqm and calculated a year-on-year decline of about 50%. Both sets of figures point to one of the weakest periods for new leasing commitments in recent years.
The size of transactions has also declined. Large relocations and expansions have become less frequent as businesses take more time over property decisions and reconsider how much space they require. This caution is particularly significant in Luxembourg because financial institutions and internationally active companies form an important part of the country’s occupier base.
Weak leasing would ordinarily be expected to leave landlords with considerably more empty space. That has not happened to the same extent in Luxembourg. Overall vacancy remained below 4% earlier in the year, leaving occupiers with relatively few immediate choices, particularly when searching for recently completed or comprehensively modernised offices.
One reason is that fewer transactions do not necessarily mean companies no longer need their existing workplaces. Rather than moving, many businesses are extending leases or renegotiating agreements with their current landlords. This allows companies to postpone major relocation costs and decisions while economic conditions remain uncertain, but it also keeps existing offices occupied and limits the amount of space returning to the market.
Rental levels underline this imbalance. Prime rents reached approximately €44 per sqm per month in the Station district and €43 in Kirchberg during the first half of 2026. The ability of leading buildings to command higher rents at a time when overall leasing volumes have fallen substantially shows that the market cannot be understood through transaction volumes alone.
Building quality is becoming increasingly important in determining where demand goes. Businesses are paying greater attention to energy consumption, environmental standards, operating efficiency, transport connections and the quality of working environments. For companies facing sustainability targets and corporate reporting requirements, occupying an older building that performs poorly can create costs and complications extending beyond the rent itself.
This creates a challenge for Luxembourg’s ageing office stock. Properties requiring major upgrades may increasingly compete in a different market from newer or extensively refurbished buildings. Owners therefore face decisions over whether to invest in energy performance, technical systems and workplace improvements or accept a potentially narrower tenant base.
Additional development should gradually provide occupiers with more alternatives, and vacancy could increase as projects are delivered. However, new supply alone may not eliminate the current imbalance. What matters is whether the buildings becoming available offer the locations, efficiency and standards that companies are prepared to pay for.
Luxembourg’s office market is therefore not simply experiencing a fall in demand. It is undergoing a more fundamental separation between overall space requirements and demand for the best properties. The decisive issue for the next stage of the cycle may be less about how many square metres remain empty and more about how much of Luxembourg’s existing office stock still matches what occupiers actually want.
