Many rents are indexed to indices published regularly by INSEE in order to take into account price changes. We are obviously thinking of the rental reference index. Published every quarter, it allows landlords of vacant rental properties to reassess the amount of rent owed by tenants. Each year, landlords can increase it by the same percentage as that corresponding to the increase in the IRL over one year for the same quarter.
This mechanism does not only concern residential leases. Other indices, less well-known but just as important, are subject to a quarterly update by INSEE, namely the commercial rental index (ILC), the tertiary activity rental index (ILAT) and the construction cost index (ICC). They are used in particular to re-evaluate commercial rents or office rental rents. They are closely monitored by companies in sectors as diverse as commerce, construction, or tertiary activities.
INSEE has just published the latest figures for these indices on September 24. And even if their increase is less pronounced than in recent quarters, the rates over one year still remain at relatively high levels.
The ILC, which is used to revise the rent of commercial leases, is thus increasing by 3.73% in the 2nd quarter of 2024. Landlords whose rent amount is indexed to the 2nd quarter can therefore increase the rent by the same rate. Even though this is a significant increase, the ILC rate is almost one point lower than in the previous quarter (+4.59% at the time). As a reminder, the ILC had reached a record ceiling of +6.69% in the 1st quarter of 2023 and the government had then put in place a cap for SMEs. Since then, the rate has continued to decrease from quarter to quarter. A phenomenon linked to the sharp slowdown in inflation in recent months.
The same observation can be made for the tertiary activity rental index. In practice, this index is used to revise the amount of rents for office buildings and professional premises used for activities other than commercial activities and logistics warehouses. As with the ILC, the annual rate of change of the ILAT continues to decrease from quarter to quarter over the same period. Its percentage change in the 2nd quarter of 2024 nevertheless remains significant, since it stands at 4.45% over one year.
Finally, the third index published by INSEE on September 24 is the construction cost index. As its name suggests, it allows us to observe the evolution of construction prices for new residential housing. Its evolution is closely monitored in the construction and real estate sectors, especially since its increases had reached record levels in recent quarters. Here too, the evolution of the ICC in the 2nd quarter of 2024 is down over one quarter and reached 3.86% over one year.
Even though the changes in the ILC, ILAT and ICC indices are still notable, they all show a decrease compared to the previous quarter. This phenomenon is expected to become more pronounced in the coming quarters due to the very marked slowdown in inflation. This is good news for companies, most of which have had to bear very strong increases in their rents in recent years.
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