Property: Paris Office: Inflation Tailwinds vs Growth Headwinds

Research evidence excerpt

Property: Paris Office: Inflation Tailwinds vs Growth Headwinds

Idea

May 12, 2026 04:00 AM GMT

Morgan Stanley & Co. International plc+MProperty | Europe Ana Escalante

Equity Analyst

Paris Office: Inflation Tailwinds Ana.Escalante@morganstanley.comMorgan Stanley Europe S.E.+ +44 20 7425-3271

Jean-Francois Ouvrard

Deputy Chief European Economistvs Growth Headwinds Jean-Francois.Ouvrard@morganstanley.com +49 69-21662813

In this collaborative report with our colleagues in the macro Morgan Stanley & Co. International plc+

Bart Gysens, CFA

Equity Analystteam, we analyse and quantify the impact from the changing

Bart.Gysens@morganstanley.com +44 20 7425-5862

macro backdrop on French office stocks

Paula Bayer

Research Associate

Key Takeaways Paula.Bayer@morganstanley.com +44 20 7425-3053

Higher inflation should translate into indexation that is better than most Property

Europe

expected at the start of the year ... Industry View Attractive

… but we think this will be more than offset by higher vacancy and finance costs

Prefer Colonial (OW) over Icade (EW) and Covivio and Gecina (UW)

Paris office stocks: two way pull. The expected inflation spike from higher oil

prices in 2026 should translate into stronger than expected rent indexation in 2027

and 2028, supporting office companies' top line growth. However, this tailwind is

likely to be offset by weaker economic growth, resulting in rising office vacancy, as

well as further negative reversion driven by a widening gap between passing rents

(linked to inflation-driven indices) and market rents (supply-demand driven).

Fundamentals remain challenged. The outlook for Paris offices remains uncertain:

sustained low take-up and supply at all-time highs, further capital value declines and