Lyon: office market shows resilience

While the commercial real estate market in the Aix-Marseille region showed a recovery in the third quarter, the slowdown detected in the Lyon market in the first half of the year is confirmed in the third quarter. With 49,100 sq. ft. leased for the last 3 months, the demand since the beginning of the year is about 167,350 sq.m. on 380 deals. This volume reflects a year-on-year decline of 27% and remains 18% below the ten-year average.

Third quarter between slowdown and stability in the rental market "The Lyon market continues to face the expectation of large companies due to the economic environment, which directly affects the volume of leased square meters. However, we see market resilience in the PMS and Mid Market segments, which remain active," explains Stéphane Julien, director of JLL Lyon's office team.

With over 60,000 sqm. leased since the beginning of the year, representing 36% of total demand, the PMS base is showing dynamism in a more challenging economic environment. The large deals segment, while continuing to suffer from a lack of very large deals (> It should be noted that refurbished buildings account for 34% of new commercial space, symbolizing the major regeneration of Lyon's office real estate. In addition, the activity of educational institutions, which account for 18% of leased demand with 29 moves, confirms Lyon's strong student dynamic.

343,000 square meters available Immediate supply in the Lyon real estate market in the third quarter rose 13% year-on-year to 343,000 square meters. Due to multiple deliveries, this growth is particularly felt in new assets, which represent 36% of total supply. In this regard, the vacancy rate rose to 4.5%, of which 4.4% on average within the city walls.

Summer contrary to the French trend

While the investment market in France continues to face several major challenges in a volatile economic environment due to rising interest rates, the Lyon region has experienced a fairly active summer. In fact, €183 million was invested in all asset classes in the third quarter, an increase of 65% compared to the previous quarter. "Since the beginning of the year, the investment market in the Lyon metropolis amounted to €545 million, a decline of 41% compared to a year ago (compared to a decline of 57% at national level) and 29% compared to the ten-year average," commented Gilles de Fontaine, Investment Director for Greater Lyon at JLL.

With more than €3.4 billion of investment in the regions, the Lyon market remains the leader among regional metropolitan areas, attracting 16% of volumes outside the Ile-de-France region. "With an average of €640 million invested during Q4 over the past 10 years, the Lyon investment market should not experience a notable end to the year as usual," the report said.

Investors' waiting hours "Given the historically low level of the ECB prime rate and its effects on 10-year OATs, prime office yields in Lyon continue to decline, ranging between 5.00 and 5.25% by the end of the third quarter," emphasizes Gilles de Fontaine. And concludes: "The revaluation phase continues along with investor expectations, which actually impacts Lyon's performance next quarter, but the planned valuation correction by the end of 2023 is expected to create new liquidity for sellers in a healthy market. "