If you're looking for an explanation for investors' lack of enthusiasm for real estate, you need look no further than its overall performance in recent years. Over the past five years and up to the peak of 2019, real estate in France has performed rather disappointingly, with the notable exception of logistics (+6.2%), reveals a study by the Institut de l'épargne immobilière et foncière (IEIF).
Covid, war, inflation, a sharp rise in interest rates... it's like the seven plagues of Egypt. It was better to put your savings in gold than in real estate.
As Stéphanie Galiègue, deputy managing director of IEIF, rightly points out, real estate entered this correction phase a little late. Particularly in France. Only listed real estate companies have done the job, and they're paying for it with a negative return of -7.3% over the last five years. Which earns them the dunce's cap.
But past performance is no guide to future performance. So we can legitimately ask ourselves whether real estate has not eaten its fill.
This is to some extent the gamble of AEW's Research team, which, in its outlook to mid-2025, announces that real estate performance on a European scale is on the "right track" for recovery over the next five years. And this despite the tariffs announced by the Trump administration, which are weighing a little on overall performance, but not that much.
The asset manager's projection of prime yields in Europe is reassessed at 8.1% p.a. in the central scenario. This central scenario takes into account a 10% increase in customs duties.
Still in this scenario, the UK would benefit the most and outperform, with a forecast total return of +9.8% p.a. And... the "prime" office, with an expected total return of +9.5%. This could explain the renewed interest in an asset class that some have already written off.
In France, after a passable 1st quarter with €1.4 billion invested in office space, we could see a rebound as early as this year. Arthur Loyd is talking of some €5 billion of office space in the Paris region in the marketing phase, under exclusivity or under promise, with unit sizes in excess of €200 million. This includes the 700 M€ of Paris Trocadéro, which, if sold, would mark a return of liquidity to this asset class.
Please note that we are talking about prime office space. Not the kind you hear so much about in the suburbs.
Be careful too. This is a central scenario. The pessimistic scenario cuts into future real estate returns, but confirms the sector's resilience. The one we don't talk about is the one that varies according to Donald Trump's announcements. A "casino" scenario of sorts, which worries not only real estate investors.