How is the french real estate market developing? A market commentary by Anne-Isabelle Carbonnières, Managing Director of our Paris office.
„The following statistics briefly show the development of the French real estate market in 2024 compared to previous years:
Compared to 2023, the investment volume on the French property market in 2024 fell by around 2% to just under €12.1 billion. Compared to the 10-year average, this corresponds to a decrease of 21%. Letting volume at 1.75 million sqm also weakened by 11% compared to the previous year.
By contrast, the 4th quarter of 2024 raised hopes of a stabilisation in the market situation, as investments increased by 27%. Despite the improvement, however, I suspect that the situation will remain volatile in 2025 as a large degree of uncertainty continues to prevail. It cannot be ruled out that Trump policies in the USA will be accompanied by inflation and rising liquidity costs. This would have a knock on impact on the European market and, therefore, also on France.
In the French capital there are large divergencies between the various Parisian sub-markets: outside of central Paris the investment market is very weak, whereas the core is experiencing strong demand despite high rents, the office rental level there is €1,200 per sqm. But who is still willing to pay such prices in the city centre? And who can still afford them? In La Defense, only five minutes away from the centre, the rent is only a quarter of this level. And in addition, the good transport links between La Defense and the city centre are particularly advantageous.
A reduction in rental levels is of great necessity if we are to achieve an increase in demand in the peripheral areas.
The gap between sellers and buyers expectations persists. Property sellers are currently trying to buy time and are aiming to realise the sale of their property for a higher price in the future if possible. Potential buyers, especially of large-volume office buildings, are also still very selective. This raises the question: has the French property market really already bottomed out?
In terms of asset classes, many investors have turned their backs on the French office market and focused on logistics portfolios. Compared to the previous year, there was a 105 % increase in the investment volume in logistics properties.
In general, the year 2025 will continue to be accompanied by many uncertainties. I expect a difficult year with a few rays of light. France is also in an uncertain place with regard to the development of the French government, which is further dampening sentiment on the market. I suspect that the investment volume for 2025 will remain moderate but stable due to the national and international situation, so we will have to wait and see how the French property market develops.“