In Limoges, a landlord who rented out a T2 rated F withdrew their property from the rental market at the end of 2024, due to a lack of budget for renovations. Their tenant, an intern at the CHU, took three months to find equivalent housing in the city center. This type of situation is multiplying in medium-sized French cities, where the rental market is transforming under the combined effect of new energy regulations, concentrated demand, and highly differentiated local dynamics.
Thermal sieves and withdrawal of properties: the rental market in medium-sized cities under pressure
The gradual ban on renting out homes labeled F and G has a more pronounced effect in medium-sized cities than in large metropolitan areas. Data from the ANAH and the National Observatory of Energy Renovation point to a high concentration of these properties in the old housing stock of town centers or first suburbs, precisely where the most affordable rental offers are located.
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A comprehensive analysis on rental trends on Trend Immo details this geographical mechanism. The anticipated withdrawal of these properties reduces the available supply and increases rental pressure in already tense areas.
The exit of thermal sieves exacerbates the shortage in older medium-sized cities. Landlord-owners who cannot afford renovations prefer to sell or leave the property vacant. As a result, the stock of small units contracts exactly where demand remains strong, particularly in cities that host students or hospital staff.
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University and hospital medium-sized cities: overheating sub-markets
Not all rental markets in medium-sized cities are alike. Those that concentrate a CHU, an IUT, or a grandes écoles show very low vacancy rates and acute shortages of studios and T2s. Caen, Poitiers, Nancy, Besançon, and Limoges fall into this category.
Demand here is structural: students, interns, young public sector professionals seek housing close to their institution, often furnished, for periods of one to three years. This tenant profile generates regular turnover but ensures a high occupancy rate.
What distinguishes these markets from other medium-sized cities
- A strong seasonal demand between June and September, with peaks in searches that saturate the available supply within weeks
- A marked preference for small furnished units, a segment where the shortage has been most visible since 2024
- A capped rental power of candidates (scholarships, intern salaries), which directs demand towards moderate rents and limits the market’s ability to absorb price increases
For an investor, targeting a medium-sized city without checking for the presence of a university or hospital hub amounts to ignoring the main driver of local rental demand.
Regulation of tourist rentals: a lever that modifies the rental supply
Since 2023, several tourist medium-sized cities have tightened their rules on short-term furnished rentals. Biarritz, La Rochelle, Bayonne, and Annecy have adopted stricter regulatory measures: mandatory declaration, compensation mechanisms, quotas in certain neighborhoods.
These regulations are starting to redirect part of the supply towards long-term rentals. Owners who previously operated their property as a tourist rental are shifting to traditional leases or mobility leases, which temporarily increases the stock available for permanent residents.
Feedback varies on this point depending on the cities: in La Rochelle, pressure seems to ease slightly on T2s in the center, while in Annecy the effect remains limited due to still dominant tourist demand. The impact strongly depends on the relative weight of the Airbnb stock compared to the total rental stock.
What this changes for an investor
Before betting on seasonal rentals in a medium-sized city, it is essential to check the local regulations in force. A municipality may impose a change of use authorization with compensation, which increases the entry cost and reduces the net profitability of the tourist rental.
Conversely, in medium-sized cities that regulate heavily, the long-term furnished lease becomes competitive against short-term rentals, with less operational management and a more stable legal framework.
Rental yield in medium-sized cities: low purchase prices and high rental pressure
The gross yield in certain medium-sized cities significantly exceeds the national average. For example, Mulhouse shows a gross yield of 13.8% according to data from MoteurImmo. Other cities like Quimper, Limoges, or Besançon offer gross yields above 8%.
This level of profitability is explained by a purchase price per square meter that remains accessible, combined with rents maintained by demand pressure. This results in a price/rent ratio that is much more favorable than in large urban areas, where the high entry ticket mechanically compresses the yield.
Criteria that make the difference between two medium-sized cities
- The actual demographic dynamics: a city that loses residents each year presents a risk of rental vacancy, even if the gross yield seems attractive on paper
- The presence of stable employers (hospital, university, military base, industry) that guarantee a regular flow of tenants
- The condition of the existing stock: a high percentage of old, unrenovated housing signals both a regulatory risk and an opportunity for low-cost purchase-renovation
- The level of rental pressure measured by local observatories, more reliable than national averages
A high gross yield is not enough without analyzing the actual local demand. Net profitability also depends on co-ownership charges, applicable taxation (LMNP, micro-BIC), and the potential cost of meeting energy standards.
The rental market in medium-sized cities no longer follows a uniform trajectory. The combination of the exit of thermal sieves, regulation of tourist rentals, and the concentration of demand around university or hospital hubs creates micro-markets with very different dynamics. Before investing, it is beneficial to analyze the target city as a local market in its own right, not just as a simple point on a yield map.