After an H1 dominated by a generalised wait-and-see approach, the market sprang to life in September as some investors decided to invest and others repositioned their investment strategies.
Offices are now sparingly selected on the key criterion of location, and the floodgates of the logistics, health and residential markets have opened.
A new balance that is increasingly multidisciplinary and regionally focused is in the process of establishing itself.  

Our vision of the French Investment Market
L'avis de Delphine Mutterer

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After an H1 dominated by a generalised wait-and-see approach, the market sprang to life in September as some investors decided to invest and others repositioned their investment strategies.

Delphine Mutterer

Key figures January 2022

Amounts invested in the non-residential real estate market in France 

Source: MBE Conseil

Amounts invested in the non-residential real estate market in France 

  • Several deals worth over €300m closed at the end of the year, which led to a strong Q4 recovery.
     
  • This somewhat compensates for the significant investment decline. Investment totalled €22.24 billion, i.e. a 7% y-o-y decline compared to 2020.
     
  • This is a direct consequence of investors’ dominant waitand-see approach during the first half of the year.

Amounts invested in non-residential real estate by size portfolios and single assets

Source: MBE Conseil

Amounts invested in non-residential real estate by size portfolios and single assets

  • Mega deals > €500m continue to decline; many deals for more than €300m have been club deals between multiple investors (2, sometimes 3). This shows that investors are willing to share the risk of large investments.
     
  • The market remains highly liquid and active for the €50m to €200m segment, which is the sweet spot for most investors.  

Amounts invested in non-residential real estate per product

Source: MBE Conseil

Amounts invested in non-residential real estate per product

  • The rise of logistics and healthcare investment is clearly visible in the figures: +43% and +356% compared to 2020, respectively.
     
  • The retail and office sectors continue their gradual decline. Investment in these asset classes have contracted by almost 50% since 2019, but the market conceals strong disparities between sectors.
     
  • In 2021, offices will account for 59% of total investment; the second largest sector is logistics, which will account for 20%.

Amounts invested in non-residential real estate  per type of investor

Source: MBE Conseil

Amounts invested in non-residential real estate per type of investor

  • In 2021, investment funds remained the main investors, representing 55% of all investment.
     
  • Despite a number of large transactions, the insurance companies’ investments fell sharply in 2021; SCPIs virtually stabilised their investments compared with 2020.

Amounts invested in the Île-de-France region  by geographic area

Source: MBE Conseil

Amounts invested in the Île-de-France region  by geographic area

  • All geographic areas generally suffered a worse performance than in 2020, except for those that demonstrated a strong and immediate resilience.
     
  • This breakthrough is particularly due to the robust performance of the logistics sector, which is mainly located in such areas.

Office yield rate

Office yields - January 2022
2014201520162017201820192020End of Q4 2021
Paris CBD4,00%3,50%3,10%3,10%3,10%3,00%2,80%2,75%
Paris secondary BD4,80%4,25%3,50%3,40%3,40%3,40%3,40%3,30%
La Défense5,60%5,00%5,00%4,10%4,00%4,00%-4,00%
Other West CBD5,50%3,65%3,65%3,25%3,50%3,60%3,25%3,50%
Other Suburbs5,25%4,50%4,25%4,00%3,80%3,90%3,67%3,68%
Provinces5,40%5,00%4,80%4,00%4,00%3,70%3,40%3,36%
Source: MBE Conseil / * : theoretical rate

Office yield rate

  • Overall, prime yields remained stable for offices in 2021, except in Paris and Lyon where they fell very slightly.

Comparative evolution of "prime" yield rates for offices and long-term bond yields

Source: MBE Conseil

Comparative evolution of "prime" yield rates for offices and long-term bond yields

  • The real estate risk premium increased in 2021. The 429 bps spread shows that it remains very high in the comparative historical curve.