Prime office cost growth was 0.7% in Q2 2025, reflecting year-on-year growth of 3.4%. Innovations in PropTech are enhancing tenant experience, boosting energy performance, and helping landlords differentiate space.
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Prime PropTech
Prime offices across our 40 global cities had modest cost growth of 0.7% in the second quarter of 2025, on average, bringing year-on-year (YoY) growth to 3.4%. This increase was driven by a 0.9% growth in gross rents and a 0.8% uptick in fit-out costs over the quarter. Strong demand for best-in-class office space continues to drive upward pressure on fit-out costs and reinforce premium pricing across major global cities.
Innovations in PropTech are enhancing tenant experience, boosting energy performance, and helping landlords differentiate their offerings in a competitive market. This quarter, we examine PropTech’s evolving role in prime office buildings, identifying the technologies gaining traction and assessing how adoption varies globally.
In Asia Pacific, net effective costs remained flat overall with no change this quarter. A story of intra-region divergence continues to play out across Asia, as key markets in Mainland China continue to see cost declines. This quarter, average costs in the Chinese markets we track fell by -2.5% as business confidence remains low and supply of prime office remains high. This decline contrasts sharply with other markets across the region, such as Kuala Lumpur, which saw 4.4% cost growth, fuelled by a flight to quality among tech firms and multinationals. The city continues to position itself as a key Southeast Asian business centre, offering a cost-effective alternative to Singapore. The success is underpinned by a deep local talent pool, a large consumer base, and a strengthening currency that appeals to global occupiers.
Australian markets also recorded strong cost growth this quarter: Melbourne and Sydney saw 3.4% and 2.7% growth, respectively. In Sydney, the Metro City and Southwest extension (opened August 2024) has strengthened connectivity across CBD corridors, boosting demand for prime office space. In Melbourne, overall cost growth has resulted from growing fit-out costs while incentives remain stable in the prime sector.
Europe and the Middle East saw 0.8% net effective occupier cost growth this quarter, continuing a pattern of moderate growth. A handful of markets outpaced the average, with Paris, Milan and Prague each recording increases above 2%. Prague saw the highest rise in the region, with 3.1% cost increases, driven largely by very limited new supply in the market. Most of the city’s prime space under construction has already been pre-let, so very little remains available to potential tenants. In Milan, 2.4% cost growth is largely attributed to rent rises, as occupier demand focuses on centrally located prime office space in the very heart of the Italian business capital, where availability remains low.
North America saw the highest increase in overall occupier costs this quarter, with average growth of 1.4%. No markets in the region experienced cost declines this quarter, and only San Francisco, Los Angeles and Chicago remained flat. The region continues to see broad appeal and strong demand for prime offices. Miami has seen significant cost growth of 3.4% over the past quarter and has the highest occupancy levels amongst major markets in the US. Florida has led corporate migration within the United States in recent years. Despite a slight slowdown in relocations, this trend remains core to the market’s cost growth.
Tenant demand for cutting-edge technology remains high, with PropTech often acting as a differentiator in leasing decisions. We surveyed Savills global experts across the 40 markets covered in this report to get a better understanding of how common some of these technologies are in the prime segment. As the flight to prime continues, digital property management platforms, smart access and HVAC systems, and occupancy sensors and space utilisation tracking are now standard across many global markets.
Demand for technology which enhances the environmental ratings of buildings is also high, especially in Europe, as real estate is a critical lever for corporate emissions reduction. Notable examples of buildings that maximise the use of PropTech to improve energy efficiency and sustainability include the Salesforce Tower in Sydney and the EDGE building in Amsterdam.
Meanwhile, AI-driven platforms represent the next frontier for employers seeking to enhance productivity and customisation.
Forward-looking AI-integrated technologies — such as AI predictive maintenance platforms, automated receptions and robotic cleaning or delivery — have seen lower levels of adoption to date. However, as the technology improves, there is room for each of these automated processes to become more common in the prime market. APAC leads the world in integrating these future-forward measures, likely because the average prime office building tends to be built more recently across the region, allowing for developers to integrate these technologies during development.
Will PropTech adoption impact service charges?
The overwhelming majority of respondents believed there would be an impact on service charges with continued PropTech adoption, but it would likely be minimal. These new PropTech features will require expense to implement, so in the short term, costs may be passed on to tenants through service charges as well as increased rents.
57% of markets predict at least moderate increases in service charges over the next 12 months, but not as a result of PropTech implementation. These forecasts are driven primarily by inflationary concerns, as well as the general rise in labour and energy costs.
As new prime office inventory begins to enter, new and innovative PropTech solutions will continue to be implemented in best-in-class buildings. This will further enhance the already strong demand for high-quality office space, in addition to location, overall workplace quality and tenant amenity advantages. It is likely that prime offices with the PropTech features outlined in this article will command higher rents in the coming years.