French commercial property rents have fallen for first time since 1997, according to MSCI.

The firm’s IPD France Annual Property Index shows that rents have dropped across all sectors.

The value of passing rents – the level of rent a tenant is contracted to pay – fell across all property by 1.7% in 2014, which means tenants are paying less in rent than 12 months ago.

The fall, MSCI said, was felt particularly within the office sector, where rents fell by 2.2% over 2014.

Stéphanie Galiegue, MSCI executive director, said the French market was operating in a “very difficult” economic context.

“Some landlords and investors prefer decreasing their rents in the short term and even offering incentives in some cases in order to avoid vacancy,” she said.

However, total returns – the actual rate of return investors derive from their real estate assets, including capital and income growth – rose across all French property to 6.3% last year, up from 5.1% in 2013.

MSCI said the increase was driven by increases in capital growth across the retail and office sectors.

Capital Growth in the office sector is back to positive territory for the first time since 2011, with the Paris central business district showing strong performance over the last 12 months.

However, the increase was offset by a fall in income return to 5.4%, the lowest level ever recorded by the IPD France Annual Property Index.

Galiegue said that, despite falling rents in 2014, there was “enduring appetite for investments” in French real estate.

“Even in sectors such as offices in the Paris central business district, where rents have slipped by 1%, prices are historically high for investors compared with the income return they achieve,” she said. 

“Some investors have consequently started investing in other locations.”