Lisbon Office Rents Surge 7.1% as Prime Space Scarcity Intensifies European-Wide Squeeze

Lisbon's office market has delivered a standout performance in the third quarter of 2025, with prime rents climbing 7.1 percent year-on-year despite a marginal uptick in availability, according to the latest European Office Occupational report by Savills, the global real-estate services firm advising institutional investors across 70 countries. The Portuguese capital now commands €32.50 per square metre per month for top-tier space, outpacing the European average rent growth of 4.9 percent and signalling robust occupier appetite in a market where only 7.8 percent of stock is vacant.

The figures position Lisbon as one of the continent’s most dynamic office hubs, with 131,200 m² absorbed between January and September 2025—41 percent of that volume concentrated in the CBD axis that runs along Avenida da República, Avenida Duque de Loulé and the Amoreiras quarter. This corridor, served by the blue and yellow Metro lines and the Rotunda interchange, remains the first choice for international corporates, law firms and tech scale-ups seeking a Lisbon address within a five-minute walk of five-star hotels, high-end retail and the Amoreiras Shopping Center, the city’s first large-scale mall opened in 1985 and still a reference landmark.

The Avenidas Novas CBD, located 3 km north-west of Baixa-Chiado and directly adjacent to the Marquês de Pombal roundabout, offers foreign investors a liquid sub-market where capital values have compounded at 5.4 % annually since 2015. Anchored by Eduardo VII Park and served by two Metro stations—Picoas and Parque—the district combines 1970s corporate towers with newly refurbished LEED-certified stock, attracting tenants willing to pay a 15 % rent premium for floor-to-ceiling height, raised floors and on-site parking ratios above 1:100 m².

For investors comparing Lisbon sub-markets, the area’s combination of scarce land reserves, high public-transport scores and proximity to the Amoreiras retail and dining cluster makes it particularly defensive during downturns. Detailed comparables are available in our Lisbon office market dashboard, updated quarterly with rent, yield and pipeline data.

Market Implications for Investors

The 7.1 % rent surge against a backdrop of near-flat availability signals a landlord-favourable equilibrium that rewards holders of prime stock—defined as either newly built or fully refurbished assets with EPC A rating, minimum 2.8 m clear height and bilingual concierge services. Investors acquiring such assets today secure an entry yield of 5.25 %, 110 basis points above ten-year Portuguese government bonds, while enjoying rental-indexation clauses linked to inflation plus 1 % that protect real returns.

Conversely, owners of secondary space—typically 1980s concrete-framed buildings lacking raised floors or modern HVAC—face obsolescence risk. Rents in this cohort have flat-lined at €22/m², and capital expenditure of €600-800/m² is often required merely to retain existing tenants. Investment-focused brokers report that value-add funds are underwriting exit yields of 6 % for successfully repositioned product, illustrating the risk-adjusted return spectrum available.

Looking ahead, the pipeline remains thin: only 95,000 m² is under construction city-wide, of which 62 % is pre-let. With Oxford Economics projecting 12,000 net office jobs annually in Lisbon through 2028, supply-demand arithmetic suggests continued rental growth of 4-6 % per annum for Grade-A space, barring an external macro-shock. Foreign investors seeking exposure should therefore factor in both yield compression and rental compounding when underwriting total returns.

Savills Data Context

Savills monitors 32 million m² of office stock across 40 European cities and is widely referenced by pension funds and sovereign wealth vehicles when allocating to real assets. Their Q3 2025 survey shows that while average European availability stayed flat at 9.3 %, prime availability fell below 3 % in Madrid, Berlin and Amsterdam—creating a spill-over search for liquidity into second-tier prime hubs such as Lisbon, Dublin and Prague where supply is still expandable.

The firm’s Iberian research team, based in Lisbon’s Parque das Nações, incorporates footfall sensors, mobile-phone mobility data and quarterly tenant surveys into its forward view. Investors relying on their forecasts should note that Savills’ baseline scenario embeds euro-zone GDP growth of 0.8 % for 2026 and a 25 bp rise in ECB policy rates, assumptions that feed directly into discounted-cash-flow models used across the market.

European CBD Competition and Lisbon’s Edge

Across Europe, Central Business Districts are experiencing a renaissance as corporates prioritise brand visibility, employee amenities and transport connectivity. Yet rent growth leaders—London’s West End (+17 %), Paris CBD (+13 %) and Frankfurt (+13 %)—now face affordability push-back from occupiers, a dynamic that advantages Lisbon where all-in occupational costs are 55 % lower than Paris and 40 % below Frankfurt for comparable floor plates.

Several structural themes reinforce Lisbon’s competitive position:

• Labour-Pool Depth: The city hosts 38 % of Portugal’s university graduates and a multilingual workforce fluent in English, French and Spanish, reducing recruitment friction for foreign tenants.
• Connectivity Upgrades: The 2022 opening of the Eastern Rail Tunnel cut journey times from Parque das Nações to the CBD to 12 minutes, expanding the viable talent catchment area.
• Regulatory Stability: Portugal’s Golden Visa programme, now channelled into funds that may hold commercial real estate, continues to attract non-EU capital that underpins developer financing.
• Cost Arbitrage: Average CBD prime rent of €32.50/m² sits well below the €43 European average, offering tenants Grade-A space at a discount while giving investors room for further growth.

These drivers, coupled with a 15 % corporate income-tax rate for qualifying activities, have encouraged firms such as Google, Mercedes-Benz and Natixis to expand Portuguese back-office functions, absorption that feeds directly into office demand forecasts tracked by investment strategy notes available to subscribers.

Investment Considerations

Buyers targeting Lisbon offices today must balance rental momentum against rising capital costs. While prime yields have hardened 25 bp over the past year to 5.25 %, swap rates have climbed faster, compressing the leveraged internal rate of return for euro-denominated loans. Investors reliant on debt should therefore structure acquisitions with 50-60 % loan-to-value and hedge interest exposure through caps or collars, tools readily structured by bilingual mortgage brokers active in the market.

Due-diligence priorities include verifying energy-efficiency labels—soon to be mandatory for new leases above 250 m²—and confirming that mechanical systems can accommodate density of one person per 8 m², the post-pandemic benchmark adopted by tech and consulting tenants. Failure to meet these standards can erode rental growth assumptions by 150-200 bp, turning an apparently accretive deal into a value trap. Foreign investors should therefore engage English-speaking lawyers familiar with Portuguese lease law and green-building certification before signing purchase contracts.

Looking Ahead

Lisbon’s office market appears poised for a prolonged rent-growth cycle, supported by constrained supply, expanding employment and relative affordability within Europe. While macro clouds—slower euro-zone GDP, rising rates and geopolitical uncertainty—could temper velocity, the structural shortage of Grade-A stock provides a buffer that favours existing owners and disciplined developers willing to break ground in 2026.

For foreign investors, the city offers a rare combination of liquidity, transparency and yield pick-up in a continental context where prime assets in core cities trade below 4 %. Those moving early, before the next construction cycle ramps up, are likely to capture both income growth and capital appreciation as Lisbon cements its status as a strategic near-shore hub. For expert guidance on sourcing, underwriting and structuring office investments in Lisbon, contact realestate-lisbon.com.