Q1 2026 confirms the polarisation of Italy's office market: solid but selective demand, historically low vacancy for Grade A stock, and prime rents hitting new highs in Milan and Rome.
Italy's office market opens 2026 with an unambiguous signal: quality is no longer a premium — it is a condition of access. First-quarter data from JLL and Savills paint a picture of a market in structural evolution, where demand is buoyant but increasingly focused on Grade A stock that is running short in the central areas of the country's main cities.
Milan: 65,000 sq m absorbed, Grade A vacancy at 3.6%
In Q1 2026, Milan recorded approximately 65,000 sq m of office take-up, plus 4,000 sq m of subleases. According to JLL's analysis, the figure is in line with the number of transactions in the same period of 2025 and above the five-year average. The defining feature of the quarter, however, is the reduction in average transaction size: from 1,200 sq m in Q1 2025 to around 750 sq m in Q1 2026 — a sign of space rationalisation reflecting a more mature, selective demand.
Around 65% of total take-up concentrated on Grade A buildings. The average vacancy rate stands at 9.4%, but falls sharply to 3.6% for high-quality stock, with availability in the CBD Duomo area virtually exhausted. Prime rents reach 820 euros per square metre per year in the historic centre and 780 euros in the most modern semi-central business districts. Leases above 600 euros/sq m/year now account for around 30% of total transactions.
Geographically, around 40% of demand is focused on central areas. Semi-central districts — particularly Farini-Isola and Porta Romana — are strengthening their strategic role, capturing over a quarter of absorbed space. Marco Pancotti, Head of Office Agency Milan at JLL Italia, describes a market that confirms its polycentric nature: semi-central areas attract transactions as alternatives to central areas, where quality supply has almost dried up.
Rome: take-up more than doubled, Grade A vacancy at 1.5%
Rome delivered a standout performance: approximately 36,000 sq m of take-up in Q1 2026, more than double the same period in 2025, according to JLL data. The result was driven by four transactions each exceeding 5,000 sq m, with the largest attributed to a public administration tenant. Grade A accounted for 57% of total take-up, in a market where vacancy for this category has fallen to 1.5%.
On the investment side, the office sector reached approximately 400 million euros in Q1 2026, with Rome outpacing Milan in investment volumes during this phase, according to the Savills report. Prime net yields remain stable year-on-year at 4.25% in Milan and 4.75% in Rome, with further compression expected as core capital gradually returns to the market.
The structure of demand: ESG and flexibility as key criteria
Rent pressure and the scarcity of prime supply are not cyclical phenomena. They reflect a structural transformation in demand: companies are seeking energy-efficient, ESG-certified, technologically advanced spaces in strategic locations. This type of asset is rare — and becomes rarer as existing stock ages without being refurbished.
According to Idealista, available supply in Milan exceeds 1.16 million square metres, but availability in central areas remains extremely limited. The shortage of quality product in city centres is keeping upward pressure on rents and making the market polycentric: semi-central areas are growing not by design, but out of necessity for occupiers who cannot find space where they would prefer to be.
Outlook: rents set to rise further, supply still insufficient
For the remainder of 2026, the picture remains favourable for owners of prime assets. According to Cushman & Wakefield estimates, rents are expected to grow further at a pace of around +1.4% per year in both Milan and Rome. The pipeline of new developments — limited and concentrated in a handful of projects — will not be sufficient to meet qualified demand in the short term. Those with quality assets in the right locations are in a position of strength. Those without must decide whether to invest in refurbishment or accept increasingly compressed returns on secondary assets.
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