A world’s first: RQR publishes the HQuality Index, the quality index for real estate

The quality index HQuality (H for Holistic) measures the individual quality of buildings and of real estate market segments. It identifies buildings that would benefit from major investments to those that could achieve a better price in the market. The rating is necessary for real estate market participants (investors, tenants, agents, experts, etc.) seeking to make informed decisions. It reduces information asymmetries, acts as a bridge between building quality and financial indicators, and includes ESG factors.

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The index calculation is based on analyzing 150 characteristics across a sample of 145 office buildings with a combined value of €10 billion euros. The HQuality index for the French office sector highlights that:

  1. the quality level of the offices in France is good with a large potential for improvement;
  2. for non prime assets current prices do not sufficiently integrate quality leading to some mis-pricing; and
  3. 15% of the buildings are currently perceived as being obsolete: efforts are needed in the area of “sustainable development”.

At end of 2018, the French office market segment has a quality rating of 12,44/20 (a total score of 622 points / 1000, see Section 1 of the synthesis). Good surprise: the quality of the structural dimensions (location, structure of work space) is relatively homogeneous and is significantly above expected levels[1]. On the other hand, the functional analysis reveals that too little investment is made in « sustainable development » and it barely reaches a level that is deemed to be acceptable by the marketplace. Therefore investments could significantly improve the positioning of the these buildings on the rental market.


Current prices (rents and rates, see section 2) are in general aligned with the quality of the buildings revealed by RQR. However, valuations could be more precise as the analysis reveals some crossover of prices across quality bands. For instance, rates potential for class A assets (Group of assets for which the rating is A, AA or AAA) are between 4 and 6%, whilst they are between 5 and 6% for class B assets. The market seems to struggle to differentiate assets with intermediate-quality or which are at the end of the RQR bands. The quality index H-Quality therefore allows for a better valuation of assets.

Finally, the strategic segmentation of the stock (see section 3) highlights that about 15% of the stock is affected by obsolescence and/or age. Amongst them, two thirds have potential for improvement due to their location. Here too, targeted investment could improve the value of these assets.

RQR will also be able to follow the performance of the index over time and will provide analysis in our next edition. It will highlight the factors that contribute to obsolescence on the one hand, and value creation on the other hand. It will also allow to view the evolution of market efficiency (consistency with quality-price) and its possible “exuberance spurts” (sudden change in the quality-price relationship). It is therefore also a tool for the prudential management of markets.


Real Quality Rating (RQR) is the world leader in the measurement of quality, risk and impact for commercial real estate assets. Founded in October 2016, it has gained the trust of major investors who now use its services to improve the accuracy and efficiency of their decisions at the international level. RQR provides an assessment of the asset quality, which is holistic, dynamic and based on the collective intelligence of the professionals of the real estate market. RQR informs the market about the price level that can be achieved by the quality of the asset: pricing decisions are better adjusted and the market as a whole is more transparent and efficient. RQR methodologies are developed within a research consortium composed of the Université Paris Dauphine and the National Centre for Scientific Research (CNRS). The European Union and the Ile-de-France region officially and financially support this project.

French Offices Quality 2018

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