The crisis is spreading to office real estate as well.

As remote working has evolved, the needs of companies have changed and the real estate market has been threatened. Real estate investments have dropped sharply in 2023. In the real estate market, crises are under the same roof. If problems in housing lead to the bankruptcy of developers, notaries and dealers, the situation with offices, another market segment, is no less alarming.

Reflecting current realities, the International Fair for Real Estate Professionals, taking place in Cannes, France, March 12-15, promises to be more intense with doubts than cocktails and yacht parties. While some in the industry are confident that recovery will come as soon as the European Central Bank starts lowering interest rates, others are predicting "blood and tears" for some time to come.

The commercial real estate market in France declined sharply in 2023. According to BNP Paribas Real Estate, investment in offices, hotels and warehouses amounted to about 14 billion euros, down from about 28-29 billion euros a year in 2020-2022. However, the rental market, "supported by growth and enterprise dynamics", is still standing strong, notes CBRE CEO Gregoire de la Ferté. But not everywhere: the migration of businesses to the centers of megacities, which began after the crisis caused by the Covid-19 pandemic, continues, leading to the release of office space on the outskirts of cities.

Changing priorities. As with housing, the office crisis is being driven by a sharp rise in interest rates starting in 2022.

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In a sector where debt is a necessary resource on par with concrete, many deals made in the era of free money are no longer profitable when interest rates rise from 0 to 4.5%. But adding to the financial problems is another phenomenon: the evolution in labor. "The real problem is not the key interest rates, their rise or fall, but the fact that office space needs have changed," explains Raphael Tregier, president of Kareg IM, a company specializing in office building conversions. Compared to the fluctuations of 1991 and 2008, "we are closer to the 1991 crisis, when there was an oversupply. But in those times, the excess was still absorbed because office space was still in demand. Now we produced a lot in 2018 and 2019, but the Covid-19 pandemic came along and the needs have changed."

"By the end of 2023, the Ile-de-France region had 4.76 million square meters of free space. Some argue that this is even an underestimate, and talk about 15 million square meters of vacant space out of 50 million square meters in the region. Some companies have empty offices, but they don't report it," agrees Grand Paris Aménagement CEO Stéphane de Faye.