France Office Real Estate Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023-2028)

The size of France Office Real Estate Market is USD 24.16 billion in the current year and is anticipated to register a CAGR of over 3.7% during the forecast period.

Key Highlights

• Due to restrictions, social distancing policies, and a work-from-home culture, the COVID-19 epidemic significantly impacted France's office real estate market. The COVID-19 pandemic significantly changed workplace working habits and locations. As a result of the pandemic, the majority of businesses have implemented remote working. Exogenous shocks like the conflict in Ukraine, soaring inflation, and supply constraints are stifling the French economy. These factors have made economic activity considerably less than anticipated at the start of 2022.
• The effects of the pandemic were felt in Q4 2021 in the office property market, albeit less so than in 2020. The consequences of this crisis were still shaking the market; at the end of the third quarter of 2021, take-up had increased by 32% year over year to a total of 1,207,900 sq m.
• In 2021, major deals, which were far less common than the previous year, would return. The prediction of demand taken up at the end of 2021 was between 1.6 and 1.7 million sq m in this environment of a cautious but genuine recovery in the office market, taking into account a traditional acceleration of signed contracts at the end of the year.
• Since Q2, the Paris office market has gained momentum and picked up speed, with more volume placed in Q3 (195,900 sq m; + 94% in one year).
• Although undoubtedly increasing, this level is still below the ten-year average in this industry. However, this increase in marketing is quite optimistic for the upcoming quarters and shows a genuine resurgence in commercial real estate activity in the capital.

France Office Real Estate Market Trends

Paris city with highest rental growth trend per annum

Paris city has consistently been regarded as a haven investment because it performs better throughout the cycle's recovery phase and is more defensive during market or economic downturns.

The French office market and all other submarkets in the Paris region have lagged behind Paris city in terms of overall returns since the recovery from the Global Financial Crisis began in 2014.

In addition to having the strongest annual rental growth trend, fueled by attractive net operating income growth and dividends for investors, Paris city has had higher capital growth driven by a strong cap-rate reduction.

The Parisian tenant landscape's innovation and product development have been the driving forces behind such rental value growth as the city's economic foundation caught up in terms of digitalization, robotization, and other technology.

The Parisian office market will continue to be a key allocation in real estate portfolios as long as rental value growth offsets the increase in the discount rate.

The sales recovery that started in Q2 2021 reached a new cruising speed in Q3, when a volume of 107,300 sq m was placed, a level 15% higher than the 10-year average and comparable to that seen in 2019 over the same period.

Since Q2, the Paris office market has gained momentum and picked up speed, with more volume placed in Q3 (195,900 sq m; + 94% in one year).

Take-up for the quarters totaled 505,600 sq m, an increase of +47% from last year. This figure is slightly below the annual result for 2020.

Although undoubtedly increasing, this level is still below the ten-year average in this industry. However, this increase in marketing is quite optimistic for the upcoming quarters and shows a genuine resurgence in commercial real estate activity in the capital.

Vacancy rates increase in Paris

Paris is one of Europe's largest commercial hubs and a global cultural center. The capital, which accounts for a sizeable portion of France's GDP, is home to some of the nation's greatest local and foreign corporations, including AXA, Credit Agricole, Societe Generale, and BNP Paribas, making its office market particularly alluring. Paris had the second-highest office rent among the main European markets in 2021, only behind London.

Although the industry was prepared to withstand the effects of the pandemic, vacancy rates kept rising, and in some submarkets in Greater Paris in the first quarter of 2022, they exceeded 10%. On the other side, the industrial and logistics sector profited from the growth of e-commerce and saw a substantial increase in demand. In the important markets, there was an increase in rentals and take-up, a measurement of the quantity of space transacted.

International investment flows specifically targeted the Paris market, which accounted for 41% of the EUR 6.7 billion (USD 16.4 billion) in commercial real estate in the city this year. This year, South Koreans prioritized the French market over the British market and invested the lion's share of this global cash.

France Office Real Estate Market Competitor Analysis

The France office real estate market is highly fragmented, with the presence of global and regional players, and the competition in the market is very high. Some major real estate players in the France include JLL France, Knight Frank, CBRE France, etc., Hines, Kaufman and Broad SA, Legenfre Group, and RedMan are the major office real estate developer companies in the France office real estate market. The market was anticipated to regain normalcy by the end of 2022. Companies are gearing up to meet future needs, and many are entering the market for further opportunities.

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• The market estimate (ME) sheet in Excel format
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