The office markets of Central and Eastern Europe are undergoing their most significant structural transformation since the sector’s emergence more than two decades ago. According to Colliers’ ExCEEding Borders Office 2026 report, the six largest office markets in the region, Prague, Warsaw, Budapest, Bucharest, Bratislava and Sofia, are being reshaped by a combination of historically low development activity, tightening availability in prime locations, rising rents and growing pressure on ageing office stock.
While concerns about hybrid work and declining office demand dominated industry discussions in recent years, the report argues that the market’s defining challenge has shifted. The primary issue facing occupiers and investors is no longer excess supply, but an increasingly limited pipeline of modern office space.
By the end of 2025, the six capitals collectively accounted for approximately 22.1 million sqm of modern office stock. Yet annual completions fell to just over 200,000 sqm, the lowest level ever recorded in the modern history of the CEE office sector. Vacancy across the region declined to approximately 10.5%, while full-year leasing activity remained stable at around 2.63 million sqm. Prime rents continued to rise in every capital, ranging from around €16 per sqm in Sofia to approximately €30 per sqm in Prague.
The Lowest Development Pipeline on Record
The most striking finding is the collapse of new office development across much of the region.
Colliers estimates that only around 300,000 sqm of office space will be delivered across the six capitals in 2026, a fraction of historical averages. Construction cost inflation, elevated financing costs, stricter lending requirements and uncertainty around future occupier demand have significantly reduced developers’ willingness to launch speculative projects.
Warsaw, which routinely delivered more than 225,000 sqm annually during the previous decade, has entered a period of structural undersupply. Developers face construction economics that make projects difficult to justify at rents below €17 per sqm, while lenders increasingly require substantial pre-leasing commitments before financing can be secured. More than 150,000 sqm of approved projects remain on hold awaiting stronger market signals.
Prague presents a different challenge. While a sizeable volume of projects remains under construction, around 60-70% of the pipeline is intended for owner-occupiers, including corporate headquarters and institutional buildings. This means only a limited amount of future space will reach the open leasing market. Prague consequently recorded the lowest vacancy rate in the CEE region at 5.8% in Q1 2026.
Budapest’s speculative development pipeline has effectively dried up. Only two small speculative buildings totalling around 5,000 sqm were completed in 2025. Rising construction costs, attractive returns from alternative investments and uncertainty surrounding exit pricing have significantly reduced development appetite. Meanwhile, older office buildings are increasingly being converted to residential or hotel uses.
Bratislava remains a highly concentrated market with only a handful of major projects under construction. Changes to zoning regulations increasingly favour residential development over office projects, further limiting future office supply.
Bucharest experienced perhaps the most remarkable milestone in the region: no new office buildings were delivered in 2025, likely the first such year in more than two decades. Approximately 49,000 sqm is expected in 2026 and less than 100,000 sqm in 2027, remaining significantly below the pre-pandemic average of 130,000-150,000 sqm annually.
Sofia is the only capital currently displaying a relatively healthy development pipeline. Around 235,000 sqm remains under active construction, with seven new office projects recently receiving permits. Demand has largely kept pace with new supply, particularly in established office clusters.
Leasing Activity Remains Stable but Has Fundamentally Changed
Although gross leasing volumes across the CEE-6 remained broadly stable at around 2.6 million sqm in 2025, the composition of demand has changed significantly.
Lease renewals and renegotiations now dominate many markets. In Prague, approximately 60% of leasing activity consists of renewals, while in Bratislava nearly two-thirds of transactions are extensions rather than new commitments. Companies are increasingly choosing to remain in existing locations rather than undertake costly relocations, particularly as uncertainty persists around future workforce requirements, hybrid working patterns and artificial intelligence-driven workplace changes.
The traditional dominance of technology occupiers is also fading. In Bucharest, the IT sector’s share of leasing activity has declined from around 50-55% in 2019 to approximately 20% in 2025. Financial services, professional services and business support functions are becoming increasingly important sources of demand. Similar shifts are visible in Sofia, where the combined IT and BPO sectors now account for around 34% of demand compared with 75-80% historically.
The result is a more diversified occupier base. Financial institutions increasingly favour central business districts and premium ESG-certified buildings, while professional services firms place greater emphasis on brand, amenities and employee experience.
Rising Fit-Out Costs Are Extending Lease Terms
One of the most important but often overlooked market shifts concerns the rapid increase in fit-out costs.
Tenant fit-out costs have risen to approximately €600-700 per sqm in Bucharest, €600-900 per sqm in Warsaw and close to €1,000 per sqm in Prague. These higher capital expenditures are encouraging both occupiers and landlords to seek longer lease commitments.
As a result, lease terms of seven to ten years are becoming increasingly common across the region. Bratislava is now regularly seeing commitments exceeding seven years, while Warsaw and Prague have also experienced a significant extension of average lease durations.
The Flight to Quality Continues to Accelerate
Perhaps the strongest theme emerging across the CEE office market is the widening performance gap between modern and older office assets.
The report identifies an increasingly pronounced polarisation between prime ESG-compliant buildings and ageing stock developed during previous market cycles. Vacancy rates in the best buildings continue to tighten, while older properties struggle to attract occupiers without significant investment.
Bucharest provides one of the clearest examples. Although the citywide vacancy rate stands at around 10.6%, modern well-located buildings often report vacancy between 3% and 9%, while older assets in peripheral locations can reach vacancy levels approaching 40%. Similar trends are evident in Warsaw, Budapest, Bratislava and Sofia.
This divergence is increasingly reflected in rental performance.
Prague remains the region’s most expensive office market, with prime rents around €30 per sqm and selected projects achieving €31-32 per sqm. Warsaw has entered a period of meaningful rental growth following years of relative stability. Budapest’s newest projects are achieving rents significantly above older stock, while Bucharest’s prime rents remain around €22 per sqm, with some upcoming projects testing higher levels.
The rental gap between prime and secondary assets continues to widen as occupiers prioritise quality, sustainability and operational efficiency.
Service Charges Are Changing Occupier Decisions
An increasingly important consideration for tenants is total occupancy cost rather than headline rent alone.
Newer buildings across the region often benefit from significantly lower service charges due to better energy efficiency, modern building systems and more efficient management. In Bratislava, modern buildings operate at approximately €3 per sqm in service charges compared with €5-6.50 per sqm for older assets. Similar patterns are visible in Bucharest and other capitals.
As a result, the overall cost difference between old and new buildings is often much smaller than headline rental comparisons suggest, further encouraging occupiers to relocate into higher-quality premises.
Office Stock Is Beginning to Shrink
One of the most important long-term developments identified by Colliers is the gradual withdrawal of obsolete office stock from the market.
Across several capitals, landlords are increasingly converting older office buildings into residential schemes, hotels, student housing or data centres. Warsaw has already seen more than 500,000 sqm removed from office stock during the past five years, while Budapest is witnessing a growing number of conversion projects.
This trend is becoming an important mechanism for reducing oversupply in secondary locations and supporting market rebalancing.
ESG Requirements Are Becoming a Defining Investment Challenge
The report emphasises that ESG certification has effectively become a baseline requirement for new office developments. However, the larger challenge now concerns existing stock. Penetration of ESG-compliant standards remains relatively low among older buildings throughout the region. In some markets, only a small proportion of existing stock meets modern sustainability requirements.
Owners of ageing assets increasingly face substantial capital expenditure requirements to maintain competitiveness, improve energy performance and meet evolving regulatory expectations. Buildings unable to justify these investments may ultimately face repositioning or alternative uses.
A Market Increasingly Favouring Landlords
Taken together, the combination of constrained supply, limited development pipelines, falling vacancy in prime locations and growing occupier preference for quality space is strengthening landlords’ negotiating position.
Large occupiers in Warsaw frequently have only a handful of suitable options available. Prime vacancy in Prague has fallen below 6%. Modern buildings in Bucharest often operate close to full occupancy, while Sofia’s most sought-after submarkets have virtually no available space.
While overall office demand remains selective rather than expansive, the scarcity of high-quality space is increasingly driving rental growth and supporting asset values.
According to Colliers, the region’s office sector is not experiencing decline but rather a profound structural transformation. The next phase of growth is likely to be defined less by the construction of new buildings and more by the repositioning, upgrading and reinvention of existing assets. For investors, developers and occupiers alike, the most important question is no longer whether offices remain relevant, but which offices will remain relevant in the decade ahead.
