The international real estate advisor is observing that vendors are seeking to hold onto prime stock where possible, and buyers are readjusting their price expectations towards the vendors’ stance.

For secondary offices on the other hand, vendors are willing to listen to bids from developers and private equity funds, but there is very little distress and buyer demand remains thin for now, due to reservations over future capex costs, or general lettability of a scheme.

According to Savills latest research prime offices in Madrid, Oslo and Amsterdam appear most attractively priced in Europe compared to their respective historic levels, given strong real rental growth fundamentals and more significant price adjustment, creating a larger spread against government bond yields.

Average prime European office yields remained stable during Q3 2024 at 4.9%, for the third consecutive quarter, says Savills. 

James Burke, Director, Savills Global Cross Border Investment, comments: “The real estate fundraising market remains difficult, but with lower interest rates and improved sentiment from lenders and investors, we expect transactions to gather pace and buyers’ expectations to move closer to vendors’ aspirations, supporting inward yield movement for prime stock during early 2025. Focus should be not only on well positioned cities, but strongly performing local submarkets.”

Mike Barnes, Associate Director in Savills European commercial research team, adds: “All in debt costs have now fallen below prime office yields across several markets, including Paris CBD, Frankfurt, Brussels, Amsterdam, Dublin, Lisbon and Madrid, which we anticipate will support core transactions during 2025. Although debt costs still remain higher than London City prime yields, we forecast prime rental growth to exceed 4% pa over the next five years, supporting total returns. In London, we are seeing more banks willing to lend at 60% loan-to-value (LTV), up from 55% in Q2, improving liquidity.”

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