Is the turbulence in the French commercial real estate market about to subside? Yes, according to figures released today by GIE ImmoStat for Q1 2025, during which €3.4 billion was invested, representing an increase of... 67% compared to Q1 2024.
" After a year of gradual recovery in 2024, this first quarter is encouraging", observes Nicolas Verdillon, Managing Director Investment Properties at CBRE France. "However, we must be careful not to declare victory too quickly. And for good reason: this performance is still 28% below the five-year average. And, let's not forget, "two major retail transactions accounted for more than a third of the total volume", adds Nicolas Verdillon.
He refers to Kering's XXL deal, which created a 40-60 JV with Ardian and institutional investors(ACM Vie and Mubadala), on a portfolio of three Parisian assets -Hôtel de Nocé, 35-37 and 56 avenue Montaigne - for €837m; but also to CDC Investissement Immobilier 's 15% stake in the Forum des Halles financing round for €235m. These two transactions alone accounted for almost 80% of retail investments (€1.3 bn) and 39% of the total volume of the commercial real estate market.
Return of core capital
"After stabilizing in the2nd half of 2024, the market is slowly but surely improving at the start of 2025", says Aymeric Sevestre, Head of Capital Markets at Cushman & Wakefield France, who considers this result "encouraging". "The signs of recovery are multiplying, pointing to a more dynamic second half of the year, driven by increasingly solid fundamentals", he adds, not without observing a return of core capital and an adjustment of investment strategies.
"Investors have completed their arbitration plans at the end of 2024, and adjusted their acquisition plans for 2025", assures the board. "Although the era of quantitative easing is over, successive interest rate cuts are helping to rekindle interest among investors, who still have liquidity to inject into the market."
BNP Paribas Real Estate moderates its overall performance, which also masks major differences between asset types. For example, "offices come out on top with over €1.4 billion, well below their five-year average (-50%), but up 50% year-on-year", notes Olivier Ambrosiali, Deputy Managing Director in charge of Sales and Investment at BNP Paribas Real Estate Transaction France.
"Most advisors agree on these "major differences"
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which can be "misleading" to read, according to Nicolas Verdillon. "On the one hand, retail benefited from two major unit deals; on the other, the pipeline provided by I&L should enable this asset class to post much more flattering results over the rest of the year..."
During Q1, investment in I&L, despite being sought after by an ever-growing number of players, thus fell by 8% to €685m. "After a particularly strongQ4 2024, due to the pressure to sign before the end of the year, 2025 got off to a slow start, benefiting little from the lag in transactions," adds François-Régis de Causans, I&L Investment Director at CBRE France. "Activity has been strong for several months, but deals are taking a long time to be signed."
The latest deal? The acquisition of a 136,000 m² platform by Tristan Capital Partners and Edmond de Rothschild for almost €120 million in Dourges.
the eyes of Franck Poizat, co-director of the Industrial division at BNP Paribas Real Estate Transaction France, "current negotiations suggest that this momentum will continue over the coming quarters". At the end of Q1, the logistics prime rate had stabilized at 4.9%.
Transactions in excess of €100m in the office segment
Back to the office segment, where "momentum is solely attributable to the Île-de-France region (+110% year-on-year), boosted by the Trinity transaction at La Défense for €350m, while the regions posted a 33% decline over the same period", notes Olivier Ambrosiali.
Following on from Q4, the asset class benefited from the completion of a number of transactions worth over €100 million, including Trinity, but also Square d'Orléans, at 80 rue Taitbout, acquired by BauMont Real Estate Capital in partnership with Picture Asset Management for just under €110 million, and 280-282 boulevard Saint-Germain acquired by Mindston Capital for around €120 million. Ultimately, these three deals accounted for half of all office investment volumes in Q1. Over the period, the average price of office space purchased in Paris Region, all states combined, came to €5,620/sq.m (including transfer taxes), representing a 12% year-on-year fall, according to ImmoStat.
the main prime yields stabilized at the end ofQ1, the yield on office space in Paris CBD saw a further compression to 3.9% at April1, 2025. "This further compression validates the solid fundamentals of the Paris market and reinforces the very strong hierarchical nature of investors' investment strategies", anticipates Olivier Ambrosiali. "Let's hope that recent economic and financial uncertainties don't weaken investors' renewed interest in real estate at a time when bond and equity markets have rarely appeared so uncertain."
What impact will the 10-year OAT have?
"Nicolas Verdillon continues: "The start of the year has been marked by investors' willingness to do what is sometimes a little forced. "In the absence of strong granularity, volumes have benefited from the continued return of transactions in excess of €100m, based on a variety of strategies, notably value-added, but also the moderate start of a return to equity core. However, market players' determination will have to contend with heightened uncertainty and volatility. Despite the fall in short rates, the sudden rise of almost 30 bp in the 10-year OAT over February-March continues to raise questions about the convergence of prices between buyers and sellers. With a large number of marketings underway or planned at the start of the year, total volumes for 2025 will depend on the market's ability to adapt to this highly volatile environment"
In other words: the end of the turbulence is not just around the corner! "We're entering the third year of the crisis, and challenges remain: banks are approaching their financing limits, and long rates remain high with no prospect of falling in the short term," says Stephan von Barczy, Director of JLL's Investment Department. "The OAT-Swap spread favors a few property-dealer-type transactions, but at the same time penalizes traditional investors such as institutional investors or SCPIs. Nevertheless, in recent weeks we've seen a resurgence in activity, with some end-of-life funds seeking new liquidity, looking to close their positions and sell, which could add further momentum to the market."