This increase continued to showcase the dual market environment witnessed since COVID-19, where investors and tenants are focussing on prime well-located assets and neglecting peripheral markets.

To illustrate this point: (i) Paris city centre saw its prime rents increase by 7% to €960 psm since Q3 2021, while (ii) peripheral markets saw stable advertised rents¹⁰, but with tenant incentives increasing to 35% vs 28% pre-COVID-19¹¹.

This, combined with an increased cost of finance and the required investments to meet medium-term compulsory energy efficiency targets¹², is likely to prove unaffordable to poorly capitalised landlords and lead to repricing.

• 10/Source: CBRE
• 11/Source: Internal information sourced from real estate brokers
• 12/Compulsory energy efficiency targets decreed by the Décret tertiaire, which requires landlords and tenants to reduce the energy consumption of their buildings by 30% and 60% by 2030 and 2050, respectively. The decree was implemented through the “Loi Elan” law of July 2019