Last update: October 2023
Key Takeaways from the Investment Real Estate Report - Q3 2023
Marketbeat Investissement market reports analyse activity in the French property investment market, taking into account volumes committed across all asset types.
Slowing at a faster pace...
After the undeniable resilience of investments in French commercial real estate compared with our main European neighbours seen over Q1, activity has significantly slowed: with €9.0 billion in investments recorded (according to provisional figures), Q1-Q3 2023 was down -56% year on year, with a sharp reduction of over -70% in Q2.
The market is still facing an unprecedented lack of available capital in the Core segment due to the low competitiveness of real estate yields compared with the levels of return now seen for financial assets and the considerable deterioration in credit conditions (availability, cost). Large transactions, which are particularly exposed to these financing issues, remained in short supply, with lot sizes >€100 million accounting for just 28% of activity (59% in 2019). The decline in international investor activity continued, reaching an all-time low of just 25%. While the various asset classes are not fully aligned in terms of correction timing, none of them are currently running against the cycle: logistics continued to fall sharply and even retail is gradually falling into line.
In view of the negotiations currently underway and a further reduction in the spread due to the latest rate hike by the ECB, the usual end-of-year surge in activity is unlikely to be seen and the full-year investment volume for 2023 is expected to be close to €12bn. The bottom of the market could therefore be reached sooner than expected, as vendors increasingly become aware of the new climate, sometimes forcibly due to their need for liquidity. Values are therefore likely to continue to fall, although with a greater degree of variation: while the various prime yields should eventually converge at 4.5% - 5% by mid-2024, with the scarcity effect on the best, most liquid assets restricting the extent of repricing, the range of rates for more secondary assets should continue to widen considerably.
