The webinar, hosted by Matthew Richardson, was the third in a series, this time exploring the European office market. It featured three expert speakers: Andrew Angeli (Zurich Insurance), Cecile Babcock (Edge Technologies), and Mike Barnes (Savills).
Market Outlook – Andrew Angeli (Zurich Insurance)
Andrew Angeli presented a cautiously optimistic view of the European office sector. Despite recent underperformance and negative sentiment, he argued that offices remain a strategic asset class, especially for institutional investors like Zurich Insurance.
Offices still accounted for 21% of European investment activity in 2024.
Investor surveys may overstate the decline in office appeal.
Zurich’s portfolio remains heavily weighted toward offices, particularly in Switzerland, Germany, Iberia, and France.
Angeli emphasized that asset-level selection is now more critical than sector-level allocation. He noted that while the U.S. office market suffers from high vacancy and oversupply, Europe’s Grade A space remains in demand. Asia-Pacific markets like Tokyo and Singapore are also performing well.
He also highlighted that:
Remote work is stabilizing, with more companies mandating office attendance.
Supply pipelines have largely shut down, limiting new development.
This supply-demand dynamic could lead to rental growth and improved performance.
Developer Perspective – Cecile Babcock (Edge Technologies)
Cecile Babcock echoed Angeli’s optimism but focused on the development and sustainability angle. Edge Technologies, a sustainable real estate developer, is shifting from ground-up projects to retrofits and refurbishments, driven by both carbon concerns and market timing.
Demand is rising for Grade A+ office space in prime locations.
Institutional capital is returning as risk perception declines.
Sustainability is no longer a premium—it’s a prerequisite for tenants and lenders.
She noted that private equity and family offices have been the most active investors recently, but institutional players are re-entering the market. Cecile emphasized that brown-to-green strategies require deep technical expertise to be financially effective.
Return expectations:
Core-plus risk for value-add/opportunistic strategies in line with INREV’s definitions.
The current opportunity window may close within 12–18 months.
Research & Leasing Trends – Mike Barnes (Savills)
Mike Barnes provided a data-driven view of the leasing and investment landscape. He confirmed that leasing activity is recovering, with a 3–5% year-on-year increase in 2025. Demand is strongest in CBDs, especially in cities like London, Milan, and major German hubs.
Rental growth over the past 5 years: ~19% in CBDs vs. ~8–9% in non-CBDs.
Grade A vacancy in prime cities is low (~2–4%), supporting further rental growth.
Flex space and plug-and-play offices are gaining popularity.
Barnes also addressed the impact of AI, suggesting it will have a modest net positive effect on office-based employment. He noted that lease terms are evolving, with more landlords offering flexible, ready-to-occupy spaces.
Q&A Highlights
Zurich is not increasing its office exposure but is rebalancing toward logistics and residential.
Debt markets are active for green, prime assets; private credit is growing as banks retreat.
Demographic shifts (e.g., aging populations) may lead to more repurposing of older stock.
The end of upward-only leases in the UK is not expected to impact prime assets significantly.
Swiss office markets remain attractive due to favourable yield spreads over low bond rates.