France’s real estate market is flourishing. Investor demand could not be greater, and the numbers speak for themselves: compared to the first six months of 2017, investment volume has risen by 49% to 13 billion euros. This growth was generated not by mega-transactions, but a greater number of individual deals.
Office investments in the lead
Office investments, which accounted for 70% of the investment volume and grew by 51% over the first half-year of 2017, continued to be everybody’s darling. Comparing investment behavior in France with that of Europe as a whole and of Germany in particular, it becomes clear that the same trends are evident across all borders. The volumes vary, but the preference for office objects is obvious. In Germany, for example, the first half of the year alone saw 11.43 billion euros invested in office space.
In France, too, the mood in the markets is good, and buyers are being guided by current fundamentals, which continue to favor investments in real estate. Employment figures are continuing to rise, ensuring a steady, strong tailwind from consumer markets. Reports indicate that more than 81,000 new jobs are being created in the Paris region alone.
Vacancies diminishing rapidly
Given the strong demand, the vacancy rate is falling rapidly. While the vacancy rate in the Ile-de-France area is 5.6%, that of central Paris is only 2.4%. This trend is setting the stage for further increases in value, and rents are rising.
Retail with enormous growth
Of the overall investment volume in the first six months of this year, 15% is attributable to retail properties. France’s retail investment market is showing enormous growth, and that is in spite of inadequate supply. Compared to the same period of the previous year, the market has grown by 57% to 1.87 billion euros.
Widely varying rents and vacancies
While peak rents in major cities are increasing, elsewhere, particularly in mid-sized cities, they are stagnating or decreasing. Vacancy rates are also variable, with inner city values ranging from less than 5% to more than 10%.
Logistics: investment volume high, space take-up lower
Thanks to the extensive portfolio, logistics investments in France showed growth of 67% over the first half-year of 2017 and have now reached an overall volume of 1.1 billion euros. The space take-up, on the other hand, at 1.5 million m², has declined to a level slightly below the figure for the first half-year of 2017.
Predominantly domestic investors
Of all investors in French real estate, 62% are from France. Foreign investors come predominantly from the USA (19%) and Germany (11%). Asian buyers are also streaming into the French market, which concurs with the trend in other European countries.
Conclusion: France’s real estate market is booming
In summary, we can say that France’s real estate market in the first half-year of 2018 is closely paralleling or has already surpassed its record year of 2017. Even though buyers’ rates of return, especially in greater Paris, are relatively low, the level of investment is still high. As no downward trend is perceptible, one may assume that France’s real estate market will conclude this year with an outstanding result.