Office

January 2026 Forecast

Demand for office space from AI companies is expected to rise sharply

Demand will focus on current tech talent hubs and key cities in countries with regulatory regimes favourable to the development of AI companies and products.

Midyear review

• Demand from AI occupiers has risen sharply and is now large enough to register in aggregate European take-up. Quarterly take-up by AI companies more than quadrupled across the last year, reaching c. 75,000 sq m in Q2 2026, representing 3.1% of European leasing activity, up from 0.6% in Q2 2025. 
• The European AI ecosystem is expanding rapidly and is starting to translate into increased demand. The growth of AI firms is set to be one of the defining features of office demand in this cycle. While activity is already evident across Europe, it is currently concentrated in a handful of talent hubs such as London, Paris, Amsterdam, Berlin, and Munich.

January 2026 Forecast

Demand in CBDs will outperform

Demand for office space will continue to be stronger in Central Business Districts (CBDs), as occupiers prioritise offices that offer the short commutes and attractive local amenities that will enable that increased attendance.

Midyear review

• Take-up in core CBD submarkets was subdued in H1, down 18.5% year-on-year as geopolitical and macroeconomic uncertainty weighed on decisions. However, performance varied by location; core CBD take-up fell most sharply, while take-up in fringe CBD submarkets increased.
• Across the markets with submarket detail, core CBD take-up fell 18.5% year-on-year while fringe CBD activity rose 1.1%, with both zones taking c. 1.6m sq m in the first half. Take-up in the periphery fell 6.4% to 1.35m sq m.
• CBD outperformance is clear, but it is being reflected in pricing and availability rather than take-up volumes with grade A vacancy as a percentage of total stock running at 2% in CBDs and year-on-year average European prime rental growth of 5.8% to the end of Q2 2026 demonstrating the strength of occupier demand.

January 2026 Forecast

Supply conditions for new centrally located offices will continue to tighten

Fiercer competition for new space expected, as supply has reached its lowest level since 2020 amid already tight central submarket vacancy.

Midyear review

• The supply of new office space has continued to decline. New analysis of submarket-level data highlights that the tightening has taken place across submarket zones.
• Over the last four quarters, rolling annual completions have fallen 22%. The decline has been driven by sharp falls across the peripheral (-26%) and fringe CBD (-24%) submarkets. New supply in core CBD submarkets held up better given stronger demand but completions still fell 18% across the last 12 months.
• Occupier demand continues to be focused on modern, new space that supports talent attraction and sustainability objectives. As the supply of new space declines, particularly in the less central submarkets that have traditionally provided a more affordable alternative, rental growth is likely to strengthen across all market segments.

H2 2026 Outlook

Supply, not demand, is the binding constraint for H2

We expect demand deferred during a volatile first half of the year to be released in H2, supporting a recovery in take-up as occupiers act on decisions that were delayed in H1. While headline vacancy is likely to edge higher, any increase will be concentrated in secondary and peripheral stock, as occupiers shed space that no longer fits their strategies.

The supply of new space will keep tightening. The rolling annual volume of completions has now fallen for five consecutive quarters and is approximately 22% below levels a year ago, a trend we expect to continue. The decline has been led by the periphery and fringe CBD, where rising construction costs and softer prime rental growth has made underwriting new developments more challenging.

This tightening supply will place upward pressure on rents in the locations occupiers are targeting: fringe and core CBD. In core CBDs, rental growth has been sufficient to support new prime office development, yet supply continues to fall short of demand. With fewer fringe CBD schemes coming through, those supply constraints will only intensify.

AI is raising the specification, not making it redundant

AI is changing what occupiers want from an office as well as how much space they want. In CBRE's upcoming 2026 European Office Occupier Sentiment Survey, the most cited expected impact of AI is a reduction in space requirements (52%). However, this is closely followed by responses that point to a growing need for better space, including multipurpose and reconfigurable layouts (48%), specialised space such as AI labs (43%), and more flexible space (38%).

Figure 9: European office take-up by AI companies & share of total

AI may reduce the quantity of space required, but it is simultaneously raising expectations around quality and functionality. This shift is taking place at a time when the supply of new, well-located office space continues to tighten.

The key question is who funds the necessary upgrades. Most occupiers plan only minimal capital investment, suggesting that much of the burden will fall on landlords. Those willing to invest in providing the space occupiers demand are likely to benefit from stronger pricing power as the pool of fit‑for‑purpose stock shrinks. Flex space is expected to play an important role, providing occupiers with greater agility without committing significant capital.

Figure 10: AI reshapes demand towards better space, it does not simply shrink it