Credit: FreepikThe Bifurcated European Office Market of 2026
As European office take-up hits a four-year high, GRI Chairmen’s Retreat Europe 2026 insights reveal a stark bifurcation in the office sector
February 26, 2026Real Estate
Written by:Helen Richards
Key Takeaways
- Approximately 90% of current office stock faces significant value challenges, leaving only top-tier Class A assets to meet modern tenant demands.
- European office take-up is forecasted to rise 3% in 2026, bolstered by record-low unemployment.
- Increased ECB oversight and lender risk-aversion are creating significant hurdles for developers and managers attempting to refinance or renovate.
As we move deeper into 2026, the European office market is telling a tale of two sectors. On one hand, data suggests a renaissance in activity; on the other, industry leaders are sounding the alarm on a structural divide that could leave a vast portion of the market behind.
For real estate investors, operators, and asset owners, the message from the recent GRI Chairmen’s Retreat Europe 2026 is clear: the office market no longer exists as a monolith. Instead, we are witnessing a sharp, perhaps permanent, bifurcation.
Cities like Frankfurt (+45%) and Dublin (+40%) are already seeing massive megadeals from the likes of Commerzbank and Workday, pushing performance well above five-year averages. With Eurozone unemployment at record lows and hiring sentiment at its highest in a year, the demand for space is undeniably returning.
However, a look beneath the surface reveals that this recovery is highly selective. Prime rental growth is expected to hit 3.7% this year - led by London City, Frankfurt, and Munich - but these gains are concentrated in a tiny sliver of the market.
The consensus is that only Class A, ESG-compliant buildings in prime locations are meeting future demand. The rest? A vast majority of secondary or poorly located stock is now considered effectively obsolete.
In a poll taken during the retreat, 68% of leaders argued that current yields only reflect fundamentals for these prime assets. Meanwhile, 18% went further, stating that current yields across the broader market are masking deep structural weaknesses.
The return to office is a genuine shift, but it depends heavily on employers delivering new types of products. The old, unrenovated grey box office has little chance of recovery. Modern employees require high-quality environments and amenities to justify the commute; if the office isn't better than their home setup, they simply won’t show up.
This regulatory pressure is making it harder for managers to secure the capital needed for the massive CapEx required to save secondary assets.
Is adaptive reuse the answer? Not necessarily. While office-to-residential is a popular talking point, discussions among the industry’s most senior players at the Retreat warned that conversions are not a universal panacea.
Projects only remain viable when floor plates, local zoning, and city-specific market support align perfectly. For many stranded assets, the cost of conversion may still outweigh the potential value.
However, for those holding secondary stock, the window for "wait and see" has closed. With 18% of the market viewed as fundamentally underwater, the strategy must shift from management to transformation - or exit.
The "return to office" is happening, but it’s a return to a different kind of office. In 2026, the winners won’t just be providing a place to work; they’ll be providing a destination worth the journey.
Read more high-level industry insights in the full GRI Chairmen’s Retreat Europe 2026 Spotlight report.
For real estate investors, operators, and asset owners, the message from the recent GRI Chairmen’s Retreat Europe 2026 is clear: the office market no longer exists as a monolith. Instead, we are witnessing a sharp, perhaps permanent, bifurcation.
Market In Recovery or In Flight?
At first glance, the macro indicators are surprisingly bullish. Recent forecasts from Savills suggest that European office take-up is set to rise by 3% year-on-year in 2026. If these projections hold, this could be the strongest year for leasing since 2022.Cities like Frankfurt (+45%) and Dublin (+40%) are already seeing massive megadeals from the likes of Commerzbank and Workday, pushing performance well above five-year averages. With Eurozone unemployment at record lows and hiring sentiment at its highest in a year, the demand for space is undeniably returning.
However, a look beneath the surface reveals that this recovery is highly selective. Prime rental growth is expected to hit 3.7% this year - led by London City, Frankfurt, and Munich - but these gains are concentrated in a tiny sliver of the market.
The 90/10 Split
While the leasing headlines are positive, the sentiment among real estate leaders at the GRI Chairmen’s Retreat Europe 2026 in January was far more cautious. A staggering 90% of properties are still estimated to be facing significant challenges regarding quality and value.The consensus is that only Class A, ESG-compliant buildings in prime locations are meeting future demand. The rest? A vast majority of secondary or poorly located stock is now considered effectively obsolete.
In a poll taken during the retreat, 68% of leaders argued that current yields only reflect fundamentals for these prime assets. Meanwhile, 18% went further, stating that current yields across the broader market are masking deep structural weaknesses.
The return to office is a genuine shift, but it depends heavily on employers delivering new types of products. The old, unrenovated grey box office has little chance of recovery. Modern employees require high-quality environments and amenities to justify the commute; if the office isn't better than their home setup, they simply won’t show up.
The "return to office" is happening, but it’s a return to a different kind of office. (Credit: Freepik)
The Conversion Myth
For asset owners looking to bridge this gap, the path forward is fraught with obstacles. Lenders have become increasingly risk-averse, with the European Central Bank (ECB) keeping a watchful eye on hidden risks and improper valuations in bank loan books.This regulatory pressure is making it harder for managers to secure the capital needed for the massive CapEx required to save secondary assets.
Is adaptive reuse the answer? Not necessarily. While office-to-residential is a popular talking point, discussions among the industry’s most senior players at the Retreat warned that conversions are not a universal panacea.
Projects only remain viable when floor plates, local zoning, and city-specific market support align perfectly. For many stranded assets, the cost of conversion may still outweigh the potential value.
Investor 2026 Playbook
The 2026 office market is defined by a race to quality. As supply of prime stock remains restricted due to a dearth of development activity, those who own or can develop best-in-class, amenity-rich assets will likely see continued rental growth and falling lease incentives.However, for those holding secondary stock, the window for "wait and see" has closed. With 18% of the market viewed as fundamentally underwater, the strategy must shift from management to transformation - or exit.
The "return to office" is happening, but it’s a return to a different kind of office. In 2026, the winners won’t just be providing a place to work; they’ll be providing a destination worth the journey.
Read more high-level industry insights in the full GRI Chairmen’s Retreat Europe 2026 Spotlight report.