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Weekly report : Covid-19

The new normal in the office market

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Week 20th to 24th april 2020

The International Monetary Fund has named this crisis «The Great Lockdown» and on 17th April it lowered its economic growth projections for 2020: -3% for the global economy, -7.5% for the eurozone, -7.2% for France. Xerfi, a market research institute, has issued a similar forecast for France (-7.6%). They all agree that growth should bounce back in 2021 (+4.5% for France, according to the IMF), but the issue today is whether growth will subsequently resume its pre-crisis level or settle at a lower level because of the permanent scars left by the crisis: the debt burden, mass unemployment, precautionary savings, restrictions on global trade. Public policy will, of course, be a determining factor in all these respects.

Office space has been the flagship product for institutional property investors in France for the past 20 years. Each year it accounts for about 60% of the total amount invested in real estate, a share that rises to 70% for commercial real estate. It therefore represents the lion’s share of real estate owned by institutional investors. Such investors generally hold office assets for long periods of time (8-10 years) and their aim is to generate a steady flow of rental income from them. This is
why they have opted for core transactions in mature locations rather than more speculative transactions. During the 2010-2020 period, yield compression nonetheless resulted in substantial potential capital gains for investors who took up positions early on in the cycle1.

1 Cf. Primonial REIM Research & Strategy, October 2019, Bureaux en Ile-de-France : nouveau cycle, nouvelles stratégies (Office real estate in the
Paris region: a new cycle, new strategies)

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note hebdomadaire covid-19 immobilier recherche Primonial REIM

ETUDE - Equipe

The team

Daniel While Research & Strategy Director

Henry-Aurélien Natter Research Manager

ETUDE - Titre nos publications

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