The French commercial real estate market is experiencing a challenging year in 2024, with investment volumes declining by 36% year-on-year over the first nine months, totaling only €13.9 billion. According to MSCI’s "Europe Capital Trends" Q3 2024 report, this represents the lowest level recorded since 2013. Various factors, from political uncertainties to structural challenges in the office sector, have contributed to this significant drop, impacting investor confidence.
Factors behind the decline
This decline reflects several key factors, including political uncertainty following France’s snap legislative election in July, which increased the risk premium required by investors to hold French government bonds. Additionally, the office sector, traditionally the main driver of French real estate investment, faces structural challenges due to hybrid working trends that have weakened demand for office spaces.
Paris, in particular, recorded a 49% drop in office investment volumes, totaling €7.3 billion. Despite this, Paris remains Europe’s second-largest investment destination after London.
Sector analysis and international comparison
A breakdown by sector shows a mixed landscape within the French real estate market:
| Sector | Q3 2024 Volume (€b) | YoY (%) |
| Office | 8.0 | -20 % |
| Industrial | 9.5 | 29 % |
| Retail | 7.5 | -2 % |
| Hospitality | 3.3 | +3 % |
| Residential | 7.8 | -2 % |
The office sector’s sharp decline contrasts with the industrial sector's strong 29% growth, reflecting a positive shift in sentiment toward logistics and advanced warehousing solutions.
Outlook
Though the French market remains under pressure, other European countries like the UK, Italy, and the Nordics are seeing signs of recovery, driven by stabilizing capital values and falling interest rates. Industrial and hospitality properties are expected to continue attracting significant interest, and a rebound in high-value transactions in other sectors may offer a path forward.
Conclusion
Despite the challenging conditions in 2024, the French commercial real estate market shows potential signs of improvement. Capital value stabilization, along with growing interest in industrial and other resilient segments, indicates a cautious but optimistic outlook for the coming year. As these trends unfold, 2025 could see renewed investor confidence and a return to activity in the French commercial property market.
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