Office real estate: European investments are up 19,5%, but AI could exacerbate vacancy rates

A growing divide between prime office and secondary assets

The European office market now encompasses two realities. On the one hand, demand is concentrated on new, well-located, environmentally efficient buildings adapted to new uses. On the other hand, aging or outlying assets face higher vacancy rates and an increased risk of obsolescence.

This polarization is exacerbated by the low number of new buildings being delivered. High construction costs, financing difficulties, and the complexity of renovations limit the development of new space in many European cities.

Upgrading an older building can also significantly impact its profitability. According to Catella, renovations can consume up to 16% of rental income in office buildings, compared to approximately 6% in logistics properties.

In this context of a shortage of quality assets, rents for prime offices have increased by an average of 6,5% per year in Europe since 2020. Secondary buildings, on the other hand, are experiencing stagnation or a decrease in their rents, while accumulating more vacant space.

Investments are picking up again, mainly in city centers.

Investments in office real estate in Europe rose by 19,5% over the past twelve months, according to the latest edition of the Catella House View study. However, this recovery remains highly selective: activity is concentrated primarily in central districts, where rental demand and liquidity remain strongest.

Catella believes the market often continues to value offices as a relatively homogeneous category, despite growing disparities between assets. This broad interpretation could create valuation discrepancies between buildings capable of generating sustainable income and those exposed to rising vacancy rates and renovation costs.

Artificial intelligence, a new source of uncertainty

Following the rise of remote work, artificial intelligence could be a new driver of transformation for the commercial real estate sector. Its impact will depend in particular on its effects on employment and on the organization of companies that are heavy users of office space.

Catella specifically identifies financial activities and business services, two sectors at the forefront of artificial intelligence adoption. A decrease in their real estate needs could primarily affect the peripheral buildings they occupy, with initial visible consequences on vacancy rates outside city centers.

The scale and timing of this phenomenon remain uncertain. Location choices will also depend on teleworking policies, company growth, and their desire to maintain offices as spaces for collaboration and representation.

In France, the recovery depends on a few major transactions

The French market illustrates this polarization. In the first half of 2026, €1,9 billion was invested in offices, out of a total real estate investment volume of €6,5 billion. Activity was mainly driven by a few large transactions involving prime and secure assets[1].

In the Île-de-France region, take-up is expected to be between 1,6 and 1,7 million square meters for the whole of 2026. Users favor well-connected buildings offering high-quality usability and good environmental performance. Conversely, secondary properties continue to face persistent vacancies.

The office nevertheless retains a strategic function for companies, which use it to bring their teams together, assert their culture, and attract talent. The potential reduction in office space is therefore accompanied by stricter requirements regarding location, services, flexibility, and environmental quality.

“The French market confirms what we are observing across Europe: value is concentrated in the best-located, newest, and connected assets. The impact of AI remains uncertain. Like Covid, its real effects will take time to measure. What is certain is that companies are becoming more selective, and assets that do not meet these criteria will gradually lose their attractiveness.”
Raphaël Amouretti, president of Catella Property.

[1] S1 2026 data, Catella Property.

Image illustrating the article via Depositphotos.com.