The Real Estate Market and the Health Crisis: Traditional Furnished Rentals Are Still Doing Well

The 3rd trimester barometer from Lodgis, the leader in furnished rentals in the Ile-de-France region, discusses the most recent updates within the Parisian real estate market. If the real estate sector is still strongly impacted by the health crisis, all indicators also seem to show an increase in traditional furnished rentals:

Alexis Alban’s, the Deputy General Director of Lodgis, analysis

The 2020 Back to School season was particular: the health crisis continues to impact the real estate sector today, however, the furnished rental market in Paris has managed to remain dynamic despite the context.
We note the shift of tourist rentals into the furnished rental market: 20% of new property owners that contact us were previously renting their properties on platforms such as Airbnb. The owners of these properties, concerned by seeing their reservations canceled and their rentability deteriorating, are either temporarily or permanently turning towards traditional furnished renting (70% of which happened in September according to a study from PAP). They are attracted by the flexibility and its advantages (flexibility, advantageous tax system, etc.) that create an attractive and trustworthy model. At Lodgis, we are delighted to be able tosupport many of the owners who find themselves helpless in the face of this crisis situation.
With the arrival of these new properties on the Parisian market, the supply of furnished apartments is exploding and future tenants, which are numerous during this back-to-school period, are spoiled for choice this year in their search for accommodation... thus encouraging landlords to do what is necessary to "stand out" (maintenance work, lower rents,inclusion of various appliances, etc.).
And French tenants, who normally look more for unfurnished rentals (which are less expensive but less numerous), are discovering these furnished offers, which correspond to their research criteria and offer multiple advantages (no moving, no real estate investment, Internet and utilities already set up, etc.). This new clientele thus makes up for the shortage of international tenants and offers, in this turbulent context, a great opportunity for growth for the traditional furnished rental market.”

A circumstantial and contained decrease in rents

With an average monthly rent of 36.60€ per m², Lodgis notes a slight decrease in rents during the 3rd trimester of 2020, however, this is less significant than that of the 2nd trimester: -2.2% compared to the 3rd quarter of the previous year (compared to -5% in the 2nd trimester of 2020).
“This corresponds to a circumstantial decrease in rents that is more contained than that of the last trimester. The market in currently regulating itself: the supply and the demand is equaling out. This should lead the market back to normal once the international tenants can return to France”, explains Alexis Alban.

Numerous French Tenants

Logically, the French represent exactly half of tenants (50%), rather than only 31% during thesame period from last year. Tenants from all of the other geographical regions have decreased: -6 for European tenants that still represent 28% of furnished rental tenants duringthe last trimester, -5 points for North American tenants, -3 points for those from South America, -3 points for those from Asia and -2 points for those from the rest of the world.
“Of course, measures taken by governments all over the world relating to the health crisis explain this decrease in international renters in France,” Alexis Alban confirms. “We note, however, that this international clientele is very attentive to the announcements made in France and in their respective countries: they are ready to restart their projects to move to Paris as soon as possible. And we are ready to welcome new international tenants as soon as the situation allows.”

Arrival of Numerous Student Tenants duringthis Back-to-School Season

The 3rd trimester, marked by the start of university academic years, includes the arrival of numerous students each year that prioritize furnished rentals more and more during their search. The proportion of students this year is similar to that of the 3rd trimester of 2019 with 51% of students (52% last year). It is important to note that professionals represent 39% of furnished rental tenants. The remaining 10% refer to personal reasons for renting (relocating, medical reasons, etc.).
“Despite the health crisis and the absence of international tenants, this year is no exception to the rule: many students are still favoring furnished rentals," explains Alexis Alban. “We also note a 20% increase in demand in September, after an unusually quiet July and August, which is most likely due to the postponing of the end-of-year exams and therefore the return to university.”.

Increase in Principle Residence Leases and Prolongation of the Length of Stay: the Highlights

Highlights for this trimester: the types of leases signed have evolved compared to the same period last year. The main residence (RP) leases increased by 9 points and now represent 36% of signed leases (compared to 27% in the 3rd trimester of 2019). On the other hand, themobility lease continues to decline, dropping from 30% last trimester to 22% this trimester.
“This decline in the mobility lease is circumstantial: the health context has imposed a freeze on professional and student mobility, and travel in general," explains Alexis Alban.“The democratization of remote work and online courses is also contributing to this phenomenon.”.

Also, French tenants of furnished apartments move in for longer periods of time for several reasons: students are enrolled in schools or universities for several years and are looking for long-term accommodation, unlike international tenants who stay in France for one semester. Lodgis also notes the return of some long-term professional expatriation projects.
The direct consequence of this phenomenon is that the duration of the rental period has increased. Tenants stay 2 weeks longer in their accommodation compared to the 3rd trimester of 2019, for an average duration of 8 months!

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