Offices after the reset: scarcer, stronger, more strategic.

Name: Wanaka Partners
Price range: $

19 Feb '26 Market Insights

Why Wanaka Partners remains firmly bullish on offices in Europe

For the past three years, it has almost become a reflex in real estate: say “office” and follow it with “structural decline”. Hybrid work, vacancy rates, and repricing are often presented as definitive proof that offices have lost their role as a core asset class.

At Wanaka Partners, we believe this narrative is incomplete and increasingly wrong. Not because nothing has changed. A lot has. But because the conclusion many draw from these changes miss the real story. The office market has not collapsed. It has reset, and in doing so it has become more selective, more disciplined, and - for the right assets - more compelling.

In Europe especially, offices are not disappearing. They are being filtered and that filter is exactly why we remain bullish.

WHY WANAKA PARTNERS REMAINS FIRMLY BULLISH ON OFFICES IN EUROPE

Europe is not “waiting for a recovery”, it is enforcing a selection

European office markets entered the post-pandemic period with a very different starting point than many global peers. Less speculative development, stronger urban cores, and stricter planning regimes meant Europe never had an unlimited pipeline of interchangeable office boxes. That matters today.

According to Savills, average office vacancy across Europe stood at around 9% in Q3 2025, but this headline figure hides a critical detail: prime vacancy in many core markets is below 3%, with rents holding firm or increasing in top submarkets.

In other words: Europe does not have an “office problem”. It has an obsolete office problem.

This distinction matters. Aggregate vacancy statistics say little about the future of buildings that are well located, energy-efficient, accessible, and capable of supporting how companies actually work today.

EUROPE IS NOT WAITING FOR A RECOVERY IT IS ENFORCING A SELECTION

Hybrid work raised the bar

One of the most persistent myths is that hybrid work automatically equals structurally lower office demand. What we see across Europe is something far more nuanced.

Yes, many companies reduced their footprint. But they did so while actively upgrading quality: fewer locations, better buildings, stronger places.

Offices are no longer neutral infrastructure; they are strategic tools. Companies lease offices to bring people together with intent, build culture, attract talent, support collaboration, and deliver wellbeing and flexibility.

This is not theoretical. Reuters reported in 2025 that return-to-office dynamics across Europe disproportionately benefited prime offices, while secondary and older stock continued to lose tenants. The conclusion is uncomfortable for some, but clear: The market is not rejecting offices. It is rejecting offices that do nothing.

ESG redefining office value

In Europe, ESG is often portrayed as a burden on offices. We see the opposite: ESG is acting as a market cleansing mechanism.

Buildings that cannot meet modern energy, comfort, and mobility standards face rising vacancy and capital expenditure they cannot economically justify. Buildings that can meet those standards face less competition, not more.

This is why much of the vacancy increase across European cities is concentrated in older, non-compliant stock, while demand for ESG-aligned buildings remains resilient. Regulation, financing criteria, and tenant expectations are all reinforcing the same outcome.

For investors, the implication is straightforward: offices are no longer passive assets. Relevance must be actively earned - but once achieved, it becomes structurally valuable.

Capital allocation beyond the headlines

Office investment volumes in Europe remain well below historical averages, and this is often cited as evidence that institutional capital has structurally “moved on” from the sector. We believe that reading is superficial.

Volumes are indeed subdued. Colliers estimates total EMEA office investment at approximately €48 billion in 2024, still well below pre-pandemic levels. MSCI data similarly shows office investment near cycle lows in several markets.

But volume alone does not explain where capital is going or why it is not going elsewhere. What the data actually reflects is a withdrawal of capital from undifferentiated assets, not from offices as a use-case.

The sharp fall in transaction volumes coincides with three simultaneous shifts in investor behaviour:

Higher conviction thresholds - with higher financing costs and more conservative underwriting, investors require clearer visibility on long-term income durability. Offices without strong location fundamentals or upgrade pathways simply fail to clear that bar.
ESG-driven risk pricing - assets with unclear sustainability trajectories now carry material capex, financing and liquidity risk. Many are effectively uninvestable at current pricing expectations, which removes a large portion of stock from the transaction market altogether.
A shrinking investable universe - as obsolete offices fall out of favour, and increasingly out of use, the pool of assets that institutional capital is willing to underwrite has narrowed considerably. Fewer assets qualify, which mechanically suppresses volumes.

As a result, the transactions that do take place look very different from pre-2020 deal flow. They are disproportionately focused on offices with prime locations, strong sustainability credentials, and clear long-term relevance to occupiers.

As the Financial Times observed in early 2026, European office deals returning to the market are driven by supply constraints and conviction in top-tier assets, not by broad-based optimism.

Capital has not left offices because it no longer believes in the function of office space. It has stepped back because the market is no longer willing to finance mediocrity.

Belgium: polarisation made visible

Belgium offers a particularly clear illustration of this dynamic because it is neither a boom market nor a distressed one. What we see instead is a market that is actively selecting.

In Brussels, CBRE reported 139,000 m² of office take-up in Q2 2025, the highest quarterly volume in nearly four years. At the same time, overall vacancy stood at around 8.3%, while prime rents remained stable at approximately €400/m²/year.

Taken together, these figures already challenge the narrative of collapsing demand. But the more important insight lies beneath the headline numbers.

CBRE explicitly linked the increase in vacancy not to a general withdrawal of occupiers from offices, but to the accelerating obsolescence of grade C stock. In other words, space is being vacated - but it is not disappearing from demand. It is being reallocated.

This reallocation is also visible at the national level. JLL expects Belgian office take-up to exceed 360,000 m² in 2025, slightly above the five-year average. Crucially, this volume is expected to be achieved through fewer, more targeted transactions.

That combination matters. Stable to improving take-up, concentrated in fewer deals, indicates that occupiers are not expanding indiscriminately. They are upgrading, moving into better buildings, better locations, and better environments. The implication is clear: Belgium does not have an office demand problem. It has a quality mismatch.

Conclusion: fewer offices, stronger conviction

The office market is not coming back to what it was. And that is precisely why it remains investable.

Across Europe, and reflected in markets like the US as well, obsolete stock is exiting, expectations are rising, and capital is becoming more disciplined. Offices that meet today’s requirements are becoming scarcer, more strategic, and more defensible.

That is why Wanaka Partners remains bullish on offices, not nostalgically, and not indiscriminately, but because the market is tougher, clearer, and more honest about what deserves to exist.

The office isn’t dead.
But the era of average offices is.
And we are very comfortable being bullish on what comes next.