Commercial real estate faces a pivotal moment

2022, the year of a return to normal on the Ile-de-France office market

For Alexandre Fontaine, Executive Director Ile-de-France Offices: “2022 will have been the year of a return to normal. Several highlights should be noted: the concentration of activity on the most established tertiary sectors and the desire of users to focus on new / restructured buildings that meet CSR issues and new expectations in terms of the environment and layout of workspaces. Despite this positive assessment, the first signs of a slowdown were confirmed at the end of the year (602.300 m² placed in 4Q 2022, i.e. -11% over one year) with a niche of small and medium-sized surfaces particularly affected. Given the more deteriorated economic outlook, this phase of slowdown in activity should continue into 2023. We anticipate a decline in the volume of lettings of around -5% to -10%, which would increase the level of take-up around 1,9 - 2 million m². »

As for office vacancies in Ile-de-France, it increased in the 4th quarter of 2022 with 4,3 million m² immediately available.

For Alexandre Fontaine: “La Défense and, to a lesser extent, the inner suburbs are behind this increase in the volume of vacant offices. In La Défense, the deliveries of the Hekla tower (1 m²) and the Aurore tower (72.700 m²), in search of takers, contributed in particular to the sharp increase in the vacancy rate in the area, which rose from 37.300, 12,4% in 3Q 2022 to nearly 15,5% in 4Q 2022. Given the levels of take-up and future supply expected in 2023, new/restructured supply should nevertheless start to shrink at the end of 2023 / beginning of 2024.”

The investment market in an area of ​​strong turbulence: after very good performances, players waiting for a stabilization of market conditions

Despite adverse financial and geopolitical circumstances, the year 2022 ended with rather good results: €25,5 billion were invested in commercial real estate in France, i.e. -2% compared to 2021. The market was driven by the renewed dynamism of retail, the maintenance of industrial and logistics investment at high levels and by the good resilience of the office market in the regions.

However, the year 2022 will go down in history as a pivotal moment between the world before - abundance of low-cost money, very low level of OAT remuneration, compression of real estate yields - and the world of afterwards, marked by the (sharp and sudden) rise in the cost of money to counter inflation, and, therefore, ultimately, the necessary rise in property yields.

For Nicolas Verdillon, Managing Director Investment Properties: “Q3 was thus a tipping point between these two paradigms, posting deceptive results: the good performance of activity was in fact the concretization of negotiations initiated at the beginning of the year at rates most often obsolete. »

With only €5,4 billion invested (i.e. -52% compared to the 4th quarter of 2021), Q4 2022 is distinguished by a weak performance despite it being traditionally a very active quarter: this bears witness to this paradigm shift and the slow adjustment of real estate players. Faced with a highly volatile environment, investors are showing a wait-and-see attitude. Although the need for a price correction is now understood, it is difficult to express itself: the timetable and the level of the readjustment therefore remain uncertain and conditioned in particular on the control of inflation by the central banks.

For Nicolas Verdillon: “In the meantime, due to a lack of convergence on prices between sellers and buyers, the market is seizing up and should regain fluidity – at best – in the second half of 2023.”