The commercial real estate market came to a standstill in early 2026, marked by geopolitical tensions and a wait-and-see approach.

This is a real chill on the commercial real estate investment market in the first quarter of 2026. Indeed, with €1,860 billion, it is the worst start to the year, after the first quarter of 2009 (€790 million).

Investment has fallen by 48% year-on-year and by 74% on the five-year average. The office sector, which had shown some signs of recovery in 2025, has returned – with barely €696 million invested – to the low share observed in 2024, representing 37% of total commercial real estate investment.

The Île-de-France region accounts for 69% of the investment volume, and 62% of investment in the region remains concentrated in the Paris Central Business District (CBD). The downward adjustment in office metric values ​​has resumed after a generally stable year leading up to 2025. Investment continues to diversify into other asset classes.

The retail sector, at €849 million, is down year-on-year (€1,3 billion in Q1 2025) but still represents 46% of the total investment in commercial real estate thanks to 2 transactions of more than €200 million recorded during the quarter.

Significantly, investment in logistics continues to slow, with barely €226 million invested, representing a third of the Q1 2025 volume, and only €6 million allocated to the Île-de-France region. This loss of confidence in the asset class is likely due to the market collapse on the user side (only 44.200 m² of logistics space was leased in the Île-de-France region in Q1) and questionable growth prospects for rental values.

To complete this bleak picture, commercial real estate barely covered 5% of the investment market in Q1 2026, with a meager volume of €89 million. The international economic situation has impacted an already fragile market. The resulting sharp tightening of financing conditions, with the French government bond (OAT) yield nearing 3,90% in recent weeks, has led to a market freeze, which could jeopardize the expected target of a 2026 market closing at around €15 billion.

The office market in the Île-de-France region also slowed in the first quarter of 2026, suffering from widespread uncertainty linked to geopolitics and upcoming elections. Take-up barely reached 367.700 sq m, just 4.000 sq m more than in the first quarter of 2021, the worst first quarter in the last 20 years. This represents a 15% year-on-year decline in take-up, with significant geographical disparities.

The good performance of the Péri-Défense should be highlighted, with strong growth both over one year and over the five-year average, with a large transaction of more than 21.700 m² in Rueil Malmaison.

In total only 7 major transactions were signed during the quarter – half as many as in Q1 2025 – representing 21% of the demand placed in the Ile-de-France region, of which only one was in Paris CBD.

This shortage of large units explains the overall underperformance. Medium-sized units and especially small units (less than 1.000 m²) have seen year-on-year growth (+3% year-on-year for the latter).

In this market configuration, the available supply continues to grow, increasing by 9% year-on-year to reach 6,3 million square meters of vacant space in the Île-de-France region. Average rents are stabilizing, with a decline beginning in some areas, including the Paris Central Business District (CBD), even though prime rents have reached a new record of €1.250/m²/year. The recovery in average rents continues in La Défense, Neuilly-Levallois, and the southern part of the city center.

“After the weak rebound at the end of 2025, fueled by a few very large transactions, the real estate investment market has once again stalled in the first quarter of 2026. The outbreak of the war in Iran has clearly frozen all decision-making. Indeed, the sharp rise in financing costs linked to fears of soaring prices and the growing uncertainty regarding the economic outlook have interrupted the market's recovery. In this context, it is difficult to predict the level of yields, due to the low number of completed transactions. As long as the risk premium does not recover, which theoretically would bring the prime QCA yield back to around 5,25% at a minimum, the market will not regain fluidity,” explains Sébastien Masson, Deputy Managing Director in charge of Capital Markets and Agency at Colliers.

"The fact that some assets are being taken over by their financiers with a 'distressed' sale objective could accelerate the adjustment of metric values."

“The war in Iran and the major energy crisis it has triggered have a very clear impact on business confidence. After three years of continuous decline in take-up, this fourth period is accentuating the slowdown in decision-making, resulting in an acceleration of the decline in take-up in large areas and most geographic sectors, including Paris's Central Business District. The financial stakes are becoming the central element in decision-making, which should allow so-called defensive markets (La Défense, Boulogne, Issy-les-Moulineaux, etc.) to come out on top.”

Illustrative image of the article via Depositphotos.com.