Redefining “Prime”: How Europe’s Office Market Is Sorting the Winners from the Stranded

Against a backdrop of slower transactions, widening yields and mounting questions about obsolescence, investors and valuers are redefining what constitutes “prime” offices across Europe, according to Jonathan Kendrick, Senior Director, Valuation Management, Europe. He offered his insights at the CREFC Autumn Conference in London in November. 

Kendrick outlined a sharper divide between high-performing, amenity-rich offices and a growing stock of transitional or “stranded” assets struggling to remain viable. “We’re seeing a mixed picture for yields and a far more nuanced approach to what counts as prime,” Kendrick said.  

In other words, the office market has stopped behaving like one big asset class. Some buildings are thriving — snapped up for their location, amenities, and sustainability credentials — while others are aging faster than a Labrador puppy. (Kendrick even flashed a photo of his colleague’s dog, Jasper, to drive the point home.) 

Deals Are Happening, But Slowly 

Across Europe, office transaction volumes have dropped sharply from their pre-pandemic highs. But the good news is that activity is starting to pick up. “We’re seeing more deals coming to market,” Kendrick said. “They’re just taking longer to close.” 

London mirrors the trend. While overall volumes are down, the market isn’t idle. As of early autumn, more than a dozen £100-million-plus deals were under offer — and some have since closed. One standout: Worship Square, a 140,000-square-foot workspace in Shoreditch designed for wellbeing, with flexible, smart technology, tailored services and a focus on community. The property traded at a roughly 6% yield. 

Still, the math has changed. From the peak of the market, London’s capital values have fallen about 25% to 30%, with yields moving outward by roughly 150 basis points. Across continental Europe, yields are about 100 basis points wider than their peak. 

What “Prime” Really Means in 2025  

So what makes a building “prime” in this new landscape? According to Kendrick, the list of must-haves has grown shorter — but tougher: 

1. Location, location… micro-location. It’s not enough to be in the right submarket. . “You have to be in the right part of the submarket,” Kendrick said. “Close to the transport links, ideally on top of the Elizabeth Line. Two streets away or two Tube stops too far, and you’re out.” 

2. Workplace experience matters. The best tenants — and the employees they’re trying to lure back to the office — expect more than desks and elevators. Fitness centers, natural light, flexible layouts, cafés, rooftop terraces — these are the new table stakes. 

3. ESG is non-negotiable. “ESG isn’t a differentiator anymore,” Kendrick said. “It’s a prerequisite.” Green credentials may not add much of a premium, but the lack of them will knock a building out of the running. 

To make sense of the market, Kendrick divides office assets into four tiers. Prime sits at the top — a narrow club of buildings that tick every box. Core follows close behind: stable income, good tenants, maybe a few missing amenities. Below that is Value-Add, where investors see opportunity through capex and repositioning. And at the bottom: Transitional or Stranded assets — the properties that have fallen behind and face hard questions about their future. 

The Growing Problem of Stranded Offices 

For these lower-tier buildings, the challenges stack up fast. Some are physically obsolete — too low-ceilinged, too inefficient, too dated to retrofit. Others face functional obsolescence, sitting in neighborhoods that have lost their edge or lack the amenities that modern tenants expect. And then there’s economic obsolescence — buildings that will never command enough rent to justify the investment needed to upgrade them. 

That creates a grim calculus. “Do you really want to spend £100 or £200 per square foot on refurbishment if the rent you can achieve afterward is still only £20-25 per square foot?” Kendrick asked. 

For some, conversion looks tempting. A few developers have successfully turned outdated offices into apartments or hotels. But the best candidates for conversion have mostly been snapped up, and redevelopment economics are still tough to pencil out. 

In short, investors face three imperfect choices: refurbish, convert, or rebuild — each with its own risks, costs and timing challenges. 

The New Rules for Valuation and Investment 

For investors and lenders, Kendrick’s takeaway was simple: the old definitions no longer apply. Prime is narrower than ever, liquidity is uneven and patience is essential. His advice? 

1. Know where your asset sits. The gap between prime and everything else has widened dramatically. 

2. Be realistic on values. With yields 100 to 150 basis points wider than their peak and capital values off by up to 30%, aggressive underwriting is a thing of the past. 

3. Budget for capex. ESG upgrades, tenant fit-outs and re-positioning costs aren’t optional anymore. 

4. Expect longer timelines. Deals are happening — just more slowly, with greater scrutiny on fundamentals. 

5. Don’t count on ESG premiums. Compliance is the baseline, not the bonus. 

A Market Sorting Itself Out 

Kendrick’s closing message was both sobering and optimistic. The office market isn’t collapsing; it’s evolving. Investors who cling to outdated definitions of “prime” risk being left behind. Those who understand the new rules — and can distinguish between assets with staying power and those aging in “dog years” — stand to benefit as the market resets. 

“The forward outlook for truly prime offices is constructive,” Kendrick said. “For everything else, you need a plan — or you could be left holding something far more challenging.” 

SitusAMC is a leading provider of comprehensive commercial real estate finance services in Europe, catering to a wide range of clients in the corporate finance sector. The firm was recently named Servicer of the Year by Real Estate Capital Europe. For more information, contact Lisa Williams at lisawilliams@situsamc.com or visit our website.