Lisbon Leads European Trend of Office Rentals Concentrating in City Centers

Lisbon Leads European Trend of Office Rentals Concentrating in City Centers

In a significant development for

Lisbon's commercial real estate market, a new report from Cushman & Wakefield (C&W) reveals a strong trend of companies prioritizing central locations for their office spaces. This shift, detailed in the 'Return to the Core' analysis, demonstrates that nearly 75% of all new lease agreements in major European cities are now for properties within Central Business Districts (CBDs), with Lisbon standing out as one of the most dynamic markets.

The report highlights the strategic importance of location in a post-pandemic world. Proximity to transportation hubs, operational efficiency, and access to a rich ecosystem of services have become paramount for businesses. This focus has led to a stark divergence in market performance between central and non-central areas. For more details on market performance, review our market insights page.

In Lisbon, this trend is particularly pronounced. The city is one of only twelve in Europe to see a year-on-year increase in central office leasing activity. The demand has pushed vacancy rates in the city's prime zones (Zone 1 and 2) down to just 4.5% and 3.8%, respectively. This contrasts sharply with the city's peripheral areas, such as the

Corredor Oeste (West Corridor), where the vacancy rate has climbed to 13.6%.

Market Implications for Investors

This "flight to quality" has clear implications for real estate investors. The data indicates that demand for premium office space in established Lisbon locations remains robust. "This sharp growth demonstrates how location has become a decisive factor in occupants' strategies," stated

Nigel Almond, Senior Director at Cushman & Wakefield. For investors, this underscores the stability and growth potential of assets in Lisbon's CBD.

The rental growth further reinforces this point. Prime rents in central European locations saw an average annual increase of 3.7%, while peripheral areas lagged at 2.3%. Over the past three years, the gap is even wider, with central rents climbing 13.2% compared to just 7% outside the core. This suggests that investing in centrally located investment properties is a more resilient strategy.

Cushman & Wakefield Report Insights

The analysis from

Cushman & Wakefield provides a detailed look into investor behavior. Core zones are being prioritized, and while prime yields in these areas have stabilized, the report notes "the first signs of a downward movement," from 5.3% in Q3 2024 to 5.2% in Q2 2025. This indicates rising capital values.

In fact, asset values in central zones have increased by 5% over the last year, marking four straight quarters of growth. Conversely, asset values in non-central locations have slightly decreased by 0.2%, highlighting a clear divergence in investment performance.

Lisbon Office Market Context

The Lisbon office market is reflecting these broader European trends, positioning itself as a key destination for international business. The city's appeal is driven by a combination of factors that create a supportive environment for commercial real estate.

Several factors continue to influence the market:

• Talent Attraction: Companies are using high-quality, well-located offices to attract and retain top talent.
• Infrastructure: Excellent connectivity through public transport makes central locations highly desirable.
• Service Ecosystem: A high concentration of restaurants, retail, and other services enhances the appeal of CBDs.
• Economic Growth: Lisbon's status as a growing tech and business hub fuels demand for office space.

These dynamics suggest that the preference for central locations is not a temporary trend but a long-term strategic shift. Our Lisbon neighborhoods guide provides more context on the city's prime commercial areas.

Investment Considerations

For foreign investors, the report's findings are a clear indicator of where to focus. The data strongly suggests that core office properties in Lisbon offer superior stability and growth prospects compared to peripheral assets. The low vacancy rates and strong rental growth create a favorable environment for landlords.

The increasing asset values in the CBD, coupled with stabilizing yields, point to a mature and confident market. Investors should prioritize buildings that offer modern amenities and are situated in prime, well-connected locations to capitalize on the current demand.

Looking Ahead

The future of the Lisbon office market looks bright, particularly for its central core.

Pedro Salema Garção, Partner and Head of Offices at C&W in Portugal, expects the preference for central locations to continue. "Companies tend to value location more, recognizing the role that well-located offices play in promoting hybrid work and intensifying in-person collaboration," he explained.

This strategic focus on quality and location will likely continue to drive the market forward, reinforcing Lisbon's position as a top-tier European city for commercial real estate investment. For expert guidance on navigating this dynamic market, contact realestate-lisbon.com.