Outlook ’25: three reasons to be cheerful about French market

Despite the political instability now gripping France there are at least three reasons to be optimistic about the French real estate market, delegates heard at Real Asset Media’s Outlook 2025 France briefing, which was held in Paris yesterday.

Cyril Robert, Head of Research France, Savills, in his keynote address at Real Asset Media’s briefing in Paris yesterday

“First of all, the quarterly trends are positive, recording a +21% between Q1 and Q3 this year, and we expect Q4 to follow the same positive trend,” said Cyril Robert, head of research France, Savills. “Second, risk-taking is acceptable again and there are opportunistic deals being done.”

The third reason for being optimistic is that the share of domestic investors is less than half of the total, which marks “a big change from 68% last year to 45% in 2024”, Robert said. “International investors are back, which is a good sign.”

The French market has been underperforming and slow-moving this year: in the first nine months of 2024 transaction volumes have remained below the €10 billion mark, which represents an 18% decrease on the same period last year, steeper than the -5% average for the EU market and a massive -51% compared to the ten-year average for France.

“It is a gloomy backdrop, but it is not all bad news,” said Robert. “The office market has almost halved as a percentage of transactions, but we expect it to pick up again and this is very good news for France as it’s its traditional core market.”

Several substantial office transactions are taking place and should clear by the end of the year, including a €120 million value-add asset in Boulevard Saint-Germain and the possible sale of Trinity Tower in La Défense to Norges Bank IM for a rumoured €360 million.

“But the French market is no longer focused on the Paris region alone,” said Robert. “This year, for the very first time, Paris accounts for less than 50% of overall volumes.” The drop from 54% last year to 44% this year for Paris was mainly due to the sale of Industrial & Logistics portfolios in the rest of France. The sector continued to attract investors’ interest: I&L transaction increased from 17% of the total in Q1-Q3 2023 to 36% in the same period this year.

Prime yields have been stabilising and “we see a spread with French bonds,” said Robert. “Bonds are likely to rise in the next few months, given the political instability in France. This leads us to be optimistic: we see the real estate market recovering and a return to transaction volumes close to €20 billion next year.”

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