The European office space market is showing signs of recovery, with a 9% increase in leasing activity during the second quarter of 2024, compared to the previous year. This uptick is primarily driven by the resurgence of the financial and insurance sectors, as well as the gradual return of employees to office environments.

Financial institutions and banks have emerged as the dominant force in office leasing, accounting for a quarter of all new leases in the first half of 2024. This represents a significant increase from the 17% share they held in the same period last year.

While the professional and business services sector remains the second-largest contributor to office leasing, its share has slightly declined. This shift reflects the changing dynamics of the post-pandemic work environment, with companies across Europe increasingly implementing minimum office presence policies to encourage employee return.

However, the office market still faces challenges. Many businesses are cautious about expanding their office footprint due to economic uncertainties, and a shortage of suitable properties is leading some tenants to renew existing leases rather than relocate. These factors continue to impact the commercial real estate sector in Europe.

Investment in European office properties has seen a significant decline, with transactions in the first half of 2024 totaling €14.1 billion, a 21% year-on-year decrease and 60% below the five-year average, a downturn largely attributed to high interest rates limiting deal activity.