Commercial real estate in France - statistics & facts
In 2023, the French commercial real estate market was the third largest in Europe. With a value of over 1.31 trillion U.S. dollars in 2023, it was only outranked by Germany and the United Kingdom. Despite the challenges faced during the COVID-19 pandemic, the market experienced growth, with the commercial rents index (ILC) showing a consistent increase. However, investment activity in the commercial real estate sector witnessed a significant decline, dropping to approximately 14.3 billion euros in 2023, the lowest value seen since 2010. The decline resulted from an overall weakening in global capital markets amid slower economic growth and tightening monetary conditions.
Overall, the commercial real estate sector in France presents a dynamic landscape, with varying trends and challenges across different property types and regions. Despite fluctuations in investment and market capitalization, the market continues to attract significant interest and remains a key player in the European commercial real estate market.
Commercial real estate in France records falling capital values decline and rising yields
In 2023, the office sector attracted the largest share of commercial real estate investments in France, amounting to 6.3 billion euros, nearly half of the total capital invested in the sector. The retail and the industrial investment sectors, on the other hand, attracted three billion euros each. The weaker investment and occupier demand market affected capital values, or the estimated value of properties based on their potential to generate income. On average, the MSCI Property Index registered a decline of over 10 percent in capital values, with offices suffering the biggest decline, while hotels and alternatives, were the least affected. Repricing in the commercial sector also led to growing yields, as sentiment waned, and investors were less likely to accept transactions at the previously lower yields. Prime office yields in the central business district in Paris recorded an increase of 1.8 percentage points between 2021 and 2023.Focus on the hotel real estate sector
The hotel sector was only slightly affected by the decline in investment transactions in 2023, showing resiliency amid the unfavorable economic climate. Hotel revenues recovered quickly from the COVID-19 pandemic, with the average revenue per available room (RevPAR) in France surpassing the pre-pandemic levels in 2022 and continuing to grow in 2023. The quick rebound could be attributed to the growing hotel occupancy rate.Overall, the commercial real estate sector in France presents a dynamic landscape, with varying trends and challenges across different property types and regions. Despite fluctuations in investment and market capitalization, the market continues to attract significant interest and remains a key player in the European commercial real estate market.
