The market in the Greater Paris Region

Île-de-France market in Q1: a rental market driven by major projects, a "non-market" for investment.

2024 is off to a similar start to 2023, with almost 451,700 m² of office space marketed in the Paris region, a level similar to that of Q1 2023 (+1%) but 15% below the ten-year average.

Immediate supply in the Paris region continues to rise, reaching 4,902,000 m² at the end of March 2024. The regional vacancy rate thus stands at 8.8%. 

Prime rents in Paris CBD passed the €1,000/m²/year mark this quarter (€1,010), while decreases were observed in La Défense, a number of outlying Paris sectors and several markets in the 2nd Couronne.

"The figures for the 1st quarter confirm our feeling that major projects are picking up again in the Paris region. We have a growing number of large-scale "stay or move" assignments to handle. In a highly segmented market, these often result in renegotiations, as landlords, wishing to secure their buildings, become more agile and propose solutions to existing tenants. For their part, relocations can take some time to materialize, as companies wish to properly assess the size of projects and avoid, as some of them have done, having to take on additional surface areas after the initial lease", analyzes Yannis de Francesco, Executive Director of the Ile-de-France Office Agency at JLL.

Following on from a year of record low sales in 2023 (~€7 billion), only €885 million was placed in the Paris region via 25 transactions in Q1 2024. This result, comparable to that of Q1 2010, represents a further decline of 64% compared to the same period last year, and of 72% compared to the 10-year average.

Prime rates on retail and warehouse assets have risen slightly, to 4.35% and 4.90% respectively at the end of Q1 2024. The prime office rate remains stable at 4.25% in the CBD, although lower rates can occasionally be observed on trophy assets.

"Given the time it takes for transactions to materialize, the lack of activity in Q1 2024 reflects a market environment that prevailed 6 to 9 months ago, when European monetary policy was still evolving and bond yields were at their highest. Since then, the financial environment has stabilized, the cost of financing has begun to fall, and value corrections have been made. These factors, coupled with the expected summer cut in key rates, should create more favourable conditions for the market as a whole. The end of free money, the decompression of real estate rates and sustainable challenges call for new value-creation strategies and reduced availability of capital.