The Tenant's Market: What Office Landlords Must Do to Stay Competitive

In the past years, the commercial real estate landscape across Europe has experienced some major shifts. For the first time in decades, tenants hold the upper hand in lease negotiations, reshaping the relationship between landlords and occupiers.

According to BNP Paribas Real Estate, the overall European vacancy rate reached 8.8% at the end of 2024, marking a significant increase from the previous year. We're in a tenant's market now, and that shift presents both challenges and opportunities for property owners and managers who are willing to rethink their approach.

‍

‍The Vacancy Problem and How Hybrid Work Changed What Tenants Need

Walk through any European business district today and you'll notice something different. Some office buildings are thriving with steady foot traffic, while others sit half-empty despite competitive pricing and recent renovations. CBRE's research shows that cities likeMadrid, Amsterdam, and Warsaw are starting to see vacancy rates stabilize or even decline. But this market-wide data obscures what's really happening underneath.

Savills' analysis of actual occupancy data reveals that European offices average around 60% occupancy. But the weekly pattern tells a more nuanced story. Tuesday through Thursday, offices are nearly as full as they were before the pandemic, with occupancy rates hovering between 65% and 68%. Monday and Friday, however, see dramatically reduced attendance.

This pattern is driving office building owners to rethink what they deliver and how they deliver it. When employees only come tothe office two or three days per week, the quality of that office experience becomes exponentially more important.

‍

‍The Rising Bar of What a High-Quality Office Building Means

CBRE's tenant surveys show that location and transit access used to be one of the most important factors when leasing an office space. However, today, tenants across all segments have raised their baseline expectations. A building that would have easily attracted tenants five years ago may now struggle with vacancy.

Concession packages have naturally grown more generous. Rent-free periods, substantial tenant improvement allowances, flexible terms, and reduced operating expense pass-throughs now form the baseline of competitive proposals. But the transformation runs deeper than financial incentives. Today's demands require genuine operational changes and philosophical shifts in how landlords approach property management.

So, what's actually driving tenant expectations in 2025?

‍

What Tenants Are Demanding Beyond the Basics

1. Sustainable & Energy Efficient Office Building

Environmental performance of the building has moved from a nice-to-have to a hard requirement. Savills found that over half of Dutch office leases signed in 2023 achieved EPC rating A or higher. Tenants set minimum standards for sustainability due to their own commitments to reduce carbon emissions, meet corporate ESG reporting requirements, and control rising utility costs.

The demand pressure is intensifying faster than supply can respond. According to the World Economic Forum and JLL, corporate demand for sustainable office buildings is growing, but supply is struggling to keep pace. Across 20 major global office markets, only 34% of projected future demand for low carbon workspaces will be met. The results are already visible: low-carbon prime office spaces in London and Paris are reaching historic rental highs even as the CRE sector slows overall, demonstrating that sustainability credentials create genuine competitive advantage.

But this goes beyond certifications and green credentials. Tenants increasingly focus on total occupancy costs rather than just base rent. Premium tenants negotiate caps on controllable operating expenses during lease negotiations, typically limiting annual increases to 3-6%, protecting themselves against spikes in maintenance and management costs. However, energy and utility costs are usually excluded from these caps, meaning tenants bear the full risk of rising energy prices. This makes energy-efficient buildings crucial for controlling costs. Savills research shows that office users are paying higher rents to move into more energy-efficient spaces, recognizing that buildings with automated lighting and HVAC systems, advanced insulation, and efficient equipment deliver lower utility bills that directly reduce their total occupancy costs.

2. Great Amenities

The experience that buildings provide has become equally important as the physical space they offer. Tenants view office space as a tool for recruitment and retention, which means the building needs to deliver an experience that gives employees a compelling reason to choose the office over working from home. This expectation translates into requirements for amenity-rich environments with outdoor terraces, fitness centers, quality food and beverage options, spaces designed for different types of work, and conference facilities that support seamless videoconferencing for hybrid meetings where some participants are remote.

3. Flexible Workspaces

According to Colliers research, flexible workspace providers have tripled their footprint in EMEA since 2010, now representing2.4% of the entire office market. This growth reflects tenant priorities around optionality and flexibility that extend beyond just choosing flexible workspace operators. Even tenants signing traditional leases are requesting shorter terms, flexible exit clauses, and options to expand or contract space as their needs evolve, reflecting a broader discomfort with long-term commitments when business conditions change rapidly and work models continue to evolve in unpredictable ways.

4. Transparency

Modern tenants demand transparency in their relationships with landlords. Whether it's understanding how operating expenses are calculated, tracking building performance, or accessing data about the spaces they occupy, tenants expect open communication and visibility into costs and operations.

However, transparency remains a challenge in practice. JLL's Green Leasing 2.0 report found that landlords and tenants often don't trust each other enough to share data on energy, water, and waste, and that this lack of transparency has limited progress in the industry. The gap between what tenants expect and what landlords provide creates friction that damages the relationship on both sides.

‍

What This Means for Office Building Owners

The shift to a tenant's market presents a clear strategic divide for building owners: adapt or battle high competition and vacancy. Here's how you can position your office building for success in the upcoming years:

From Space Providers to Experience Creators

Physical amenities do matter in creating compelling office experiences. Outdoor terraces where employees can take calls or have informal meetings, quality F&B options that eliminate the lunch expedition, fitness centers that save commute time to the gym, and varied spaces designed for different work modes, all of these elements give employees tangible reasons to choose the office over working from home.

But while physical amenities create the foundation, and you shouldn’t disregard them, the real competitive advantage lies in how you manage your buildings and how you build relationships with your tenants. Think about what actually shapes a tenant's daily experience: Does your maintenance team show up within hours when something breaks, or does it take days of follow-up calls? When the quarterly reconciliation arrives, can your tenants understand where every euro went, or are they left deciphering vague line items? Do you proactively share building’s sustainability data, or do tenants need to request it repeatedly?

These operational details determine whether your tenants renew or start looking for alternatives. Landlords who proactively share performance data and cost structures transform the relationship from adversarial to collaborative, benefiting both parties throughout the lease term.

More Focus on Energy Efficiency and Sustainability

With only 34% of projected future demand for low-carbon workspaces being met across major global office markets, and tenants bearing full exposure to energy cost volatility, environmental and energy performance has become a financial imperative for both parties.

Meaningful improvements don't always require massive capital expenditure. You can get 20-30% reductions in energy consumption by optimizing existing HVAC systems and eliminating waste from unused spaces, improvements that will pay for themselves through reduced operating costs. Building performance partners like Next Sense offer expert-led approaches with tangible ECM (energy savings measures) recommendations and real visibility into building performance, allowing you to start with quick wins that improve both energy performance and tenant comfort without big CapEx.

Rethinking Lease Structures

The rigidity of traditional 10-year leases no longer matches tenant comfort levels with long-term commitments.Progressive landlords are experimenting with hybrid lease structures: shorter initial terms with renewal options, expansion rights tied to specific spaces, or staggered expirations that allow tenants to adjust their footprint as needs evolve. While this creates more uncertainty for you as an owner, it's becoming necessary to compete for quality tenants.

‍

The Path Forward

CBRE's outlook suggests that landlords who don't continuously evolve their offerings will find themselves losing tenants to buildings that better meet modern expectations. Success requires accepting that yesterday's advantages don't guarantee tomorrow's occupancy.

Location, good transit access, and a prestigious address are important foundations, but they're no longer sufficient on their own. The landlords who will thrive are those who understand they're in the experience business and the service business. They invest continuously in amenities, technology, and service capabilities. They lead with transparency and flexibility. They treat tenant relationships as partnerships focused on mutual success.

The market has evolved in ways that affect every property owner. The question is whether your approach has evolved to match where tenant expectations have moved.