Investments in the asset class reached €3.5bn in Q4 2022, a 48% decrease compared to last year, symptom of an asset class with declining investor appetite due in part to the growing adoption of working from home. This pullback, however, is not seen in all submarkets, which reflects the market dichotomy discussed earlier in this report. On the one hand, central Paris has seen rental increases of 4.2%, reaching a record prime rent of €1,000 p.sqm[8]. On the other hand, rents in peripheral markets are stagnating or declining, while incentives have increased by up to 35% since pre-COVID levels⁷. In the coming years, peripheral markets are expected to significantly reprice with declining valuations and increasing financing costs resulting into more stressed and distressed situations. This is expected to create an opportunity to acquire assets at appealing prices focusing on assets where rental prospects remain robust.

[8]Source: CBRE