Milan Office Market: Emphasizing Quality Still Crucial

In the early months of 2026, the Milan office market transitioned into a period of natural stabilization following a remarkably active previous year. Recent research by IPI reveals that office space uptake in the initial quarter totaled approximately 72.4 thousand sq. m. While this figure falls short of the record levels seen in 2025, it aligns well with the market's historical trends.

Throughout this period, 98 deals were finalized, indicating not a decline in business activity, but rather a more discerning and balanced approach by tenants. Market fundamentals remain steady, with an overall vacancy rate of about 9.15% and an available space volume of roughly 1.18 million sq. m.

Focus on Quality as a Decisive Factor

The standout feature of the first quarter was the significant demand for top-tier offices. Out of the total space absorbed, around 54.1 thousand sq. m, or 75%, were attributed to Grade A and Grade A+ properties.

Grade A+ properties emerged as the most sought after, representing 40% of all transactions. Another 35% were accounted for by Grade A spaces, while Grade B offices only made up 25%.

This demand pattern mirrors companies' consistent preference for contemporary buildings meeting strict technical standards, energy efficiency criteria, and equipped with high-quality infrastructure. Notably, the vacancy rate in the premium sector stands at just 3.2%, notably lower than the market average, underscoring the high demand for top-notch properties.

Demand Distribution: CBD Retains Dominance

Activity continues to be concentrated primarily in the central business district (CBD), which represents half of the total uptake volume.

The peripheral zone follows in second place with a 27% share, succeeded by:

• semi-peripheral areas - 11%;
• suburban areas - 8%;
• the historic center - 4%.

This distribution reaffirms companies' inclination towards areas with excellent transport links and developed urban settings, considering these aspects crucial in their office location strategy.

Rental Rate Growth in Prime Locations

Rental rates in prestigious areas continue to trend upwards. The highest rental rate in the CBD reached 800 euros per sq. m annually, with the prime net yield for top properties around 4.15%.

A comparison between the first quarters of 2025 and 2026 reveals increases across most segments:

• Duomo: from 750 to 780 euros/sq. m per year;
• Porta Nuova: from 720 to 770 euros;
• Central districts: from 600 to 620 euros;
• Semi-periphery: from 460 to 480 euros.

Positive trends are also noted on the outskirts:

• Bicocca — from 320 to 360 euros;
• CityLife — from 480 to 500 euros;
• Porta Romana — from 380 to 400 euros.

An exception is the MIND area, where rates remain at 300 euros per sq. m annually. In suburban regions, rates rose from 240 to 260 euros.

Transaction Patterns and Popular Areas

The predominant mode of market absorption continues to be traditional leasing, covering nearly 63.9 thousand sq. m.

Other transaction types were distributed as follows:

• acquisition for own use (owner-occupier) - 10.2 thousand sq. m;
• expansion of current spaces (expansion) - 3.1 thousand sq. m;
• subleasing — around 4 thousand sq. m;
• pre-letting — 2.5 thousand sq. m;
• revision of existing leases — 2.5 thousand sq. m.

The most sought-after offices were those sized between 500-999 sq. m and 1,000-2,999 sq. m, each accounting for 43% of total transactions. Spaces ranging from 3,000-4,999 sq. m made up 12%, whereas small offices under 499 sq. m represented only 2% of the market.

Secondary Stock and the Imperative for Upgrades

Despite the premium segment's strong performance, a notable portion of existing office stock faces obsolescence issues. Inadequate technical features, low energy efficiency, and the need for significant modernization diminish the appeal of such properties and heighten their market exposure.

Simultaneously, the anticipated new supply volume from 2026 to 2028 remains restricted. Consequently, pressure on rental rates within the high-quality office sector is likely to persist.

Given these circumstances, refurbishing and renovating existing structures emerge as pivotal market objectives for the forthcoming years. Successful execution of renovation initiatives will be crucial not only for individual property owners but also for enhancing Milan's overall office supply quality.

Investment Market: Emphasis on Quality and ESG

The investment landscape remains highly selective, with a focus on contemporary, high-standard properties and renovation undertakings in established business districts.

ESG considerations continue to hold significance, progressively influencing investment choices.

Over the medium term, stability is foreseen in the premium segment due to the scarcity of modern offices and robust demand from companies seeking top-notch work environments.