Outlook ’25: bottom reached, French asset values set to rise

The bottom of the market has been reached and next year will see more activity as investors are ready to deploy capital in real estate again, experts agreed at Real Asset Media’s Outlook 2025 France briefing, which was held recently at Taylor Wessing’s offices in Paris.

“This year was the low point in the cycle and there’s a clear expectation that values will increase again,” said Benjamin Cartier-Bresson, head of Paris office, Berlin Hyp. “The mood is good, much better than a year ago.”

Price adjustment has taken longer in the slow-moving French market than in the UK market, but the direction of travel has been the same. The results can already be seen: in Q4 more deals were done and some dynamism returned, which is expected to continue in Q1 next year.

“2024 was one of the most difficult years, but now we are seeing more foreign investors active in the French market, which is a positive sign that most of the correction in values has been done,” said Béatrice de Quinsonas Drouas, director of research, BPCE Real Estate Solutions. “We do regular surveys and now for the first time in nearly two years there’s a clear intention to allocate more money, rather than less, to real estate.”

Some people are still not sure if the price is right and are hesitant to go to their investment committee and suggest making a big acquisition.

“A few investment funds think the market is still in a sort of crisis and they are not ready to deploy money, because they bet that the downward adjustment is not complete yet and they prefer to wait,” said Cartier-Bresson.

But on the other hand, those who dither in the hope sellers will be forced to accept lower prices risk missing the boat, because values are going up again.

“There is a lot of money sitting there waiting for prices to fall even further,” said Alfred Fink, partner, Taylor Wessing. “But most believe the market has bottomed out and investors are now in a positive mood. Some big funds have sold a few family jewels and now have liquidity to use for new projects and a clear strategy. There will definitely be an uptick in 2025.”

It is likely to be a gradual increase in activity rather than a sudden flurry of deals.

“Core investors are returning, not rushing in but trickling back to the market because they have liquidity,” said Laurie Lagarde, head of EMEA logistics operator division, CBRE Investment Management. “We expect more capital to be deployed next year.”

The French market is now ready to pick up but it has shown resilience this year because, despite the slowdown in transaction volumes, there has been no crisis.

“There are no repossessions happening, no problems in the market,” said de Quinsonas Drouas. “This shows that the negotiations between banks and investors have gone well.”

Adjustments had to be made on the lending market as values dropped and in some cases collapsed this year, but they were made smoothly in most cases.

“We had to de-leverage a number of properties, usually through so-called loan-to-value covenants, which must be met according to the loan agreements,” said Cartier-Bresson. “These were not always easy discussions, but they went well, and usually investors had some equity to deploy to resolve the situation.”

Typically, the leverage cannot exceed 50% or 60%, so when the value of a property decreases by 30% or more something must be done. Equity must be brought in to repay part of the loan.

“In the end, we can all be very happy with the fact that there was no major trouble at lenders’ level,” Cartier-Bresson said. “This is very satisfactory, because it enables us to be ready for new business when the investment market picks up again.”