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The French Real Estate Market in 2024: Challenges and Opportunities

Updated: Jun 20

The French real estate market is currently at a turning point, facing significant challenges while showing signs of recovery. The complexity of the current economic environment requires an in-depth analysis to navigate this sector effectively. This barometer aims to provide this analysis by examining the economic, political, and social factors that influence investment decisions.

One of the key aspects of the report is the identification of current trends and forecasts for 2024. The information provided helps to understand how fluctuations in interest rates, geopolitical uncertainties, and new environmental regulations impact the real estate market. Based on solid data and rigorous analysis, the barometer offers a clear vision of the anticipated movements.

The evaluation of allocation strategies is another strong point of this report. By analyzing past performances and future prospects, it guides investors in their choices, highlighting the most promising sectors such as logistics and healthcare real estate. It also addresses market segments with the best growth and return potential, while acknowledging the obstacles to be overcome, such as high construction costs and strict regulations.

Economic Context

The French real estate market is currently at a crucial turning point, facing significant challenges while showing signs of recovery. This duality is particularly evident in 2024, a year that could be pivotal for the transition of this key sector of the French economy.

The real estate market continues to face several major obstacles. One of the main challenges lies in the persistent gap between the expectations of buyers and sellers. Acquisition and sale prices struggle to converge, slowing down transactions and creating uncertainty about the real value of real estate assets. This imbalance is often amplified by optimistic evaluations from sellers, based on past market conditions or more favorable economic prospects. Conversely, buyers, aware of economic uncertainties and associated risks, hesitate to pay high prices without significant adjustments.

This divergence creates an environment where transactions are frequently delayed, negotiations are prolonged, and the overall sales volume decreases. Real estate valuation experts play a crucial role here by providing objective and independent assessments. Their expertise helps to bring the expectations of both parties closer together, facilitating negotiations and overcoming market blockages.

Economic and political uncertainty is another significant obstacle. Fluctuations in interest rates and geopolitical turmoil negatively influence investment decisions. Investors remain cautious, fearing unpredictable market fluctuations that could affect the profitability of their investments. This caution translates into a reduction in transactions and a wait-and-see attitude.

At the same time, strict environmental regulations, although necessary, add a layer of complexity and costs for real estate developers. High construction material prices and a shortage of skilled labor also limit the profitability of new projects and slow down construction starts. These constraints, combined with regulatory requirements, can deter investments in new projects, thus slowing the expansion of the real estate market.

Despite these challenges, several indicators show that the real estate market could start to recover. In 2024, the reduction in allocation to commercial real estate compared to stocks and bonds is less pronounced than in 2023, indicating a stabilization of investment flows towards commercial real estate, once again perceived as a resilient asset. This stabilization is an encouraging sign, suggesting that investors are gradually regaining confidence in the real estate market.

Real estate continues to play a crucial role as a hedge against inflation. Investors see this asset class as a reliable protection against monetary depreciation, which supports the demand for quality real estate. In times of economic uncertainty, investors favor portfolio diversification. Real estate, with its stable returns and resilience, fits perfectly into this strategy, offering a balance against the fluctuations of stock and bond markets.

The global macroeconomic environment has a major influence on the French real estate market. Economic forecasts for 2024 suggest a gradual stabilization of the economy, with interest rates potentially starting to stabilize after a period of increases. This stabilization of interest rates would benefit the real estate market by reducing borrowing costs and making real estate investments more attractive. Additionally, the European Central Bank's (ECB) monetary policy aimed at keeping rates low to support growth should favor real estate investments. An expected decrease in key rates could also boost investor confidence and stimulate real estate transactions.

Investment Volume and Forecasts

The investment volume in commercial real estate in France for 2024 is expected to be 9.3 billion euros. Although this figure is encouraging compared to recent trends, it remains significantly lower than pre-crisis levels. To put this into perspective, the investment volume in 2022 was 25.9 billion euros, nearly three times the anticipated amount for 2024.

Comparison with Previous Years

Before the crisis, the French real estate market displayed robust investment volumes. In 2019, the total invested in commercial real estate reached approximately 32.2 billion euros, reflecting a booming market with strong investor confidence. This period was marked by sustained activity and favorable economic prospects, attracting significant capital to commercial real estate.

The COVID-19 pandemic marked a decisive turning point for the real estate market. In 2020, the investment volume dropped to 22.6 billion euros due to global economic uncertainty and sanitary restrictions. This decline highlighted the market's vulnerability to exogenous shocks and forced investors to reconsider their strategies.

In 2023, the investment volume fell to less than 12 billion euros, a level comparable to that observed after the global financial crisis, highlighting the depth of the pandemic's impact and the ensuing economic crises. This continued decline reflected increased caution among investors facing volatile market conditions and uncertain economic prospects.

Forecasts for 2024 and 2025

The investment volume forecast for 2024, at 9.3 billion euros, reflects persistent caution among investors. Several factors contribute to this caution. The mismatch between buyer and seller expectations continues to hinder transactions. Investors await more attractive opportunities or significant price adjustments before fully committing. This divergence of expectations slows down the transaction process and creates an environment of uncertainty regarding asset valuation.

Economic and geopolitical uncertainties also play a crucial role. Although signs of stabilization are present, potential fluctuations in interest rates and global economic conditions maintain a climate of caution. Investors are aware of the risks associated with changes in monetary policies and the potential impacts on borrowing costs and real estate investment returns.

However, the forecasts for 2025 show a slight improvement with an anticipated investment volume of 11.4 billion euros. This increase, although modest, suggests a gradual regaining of confidence in the French real estate market. Several factors could contribute to this improvement. The stabilization of interest rates, or even a slight decrease in the ECB's key rates, could reduce borrowing costs and make real estate investments more attractive. A more accommodative monetary policy could encourage capital flows into the real estate sector, improving liquidity and transaction volumes.

Additionally, a slight compression of prime yields on certain asset types could also stimulate investments, particularly for high-quality assets in prime locations. This compression of prime yields would indicate a perception of lower risk and increased competition for quality assets, potentially energizing the market and attracting more investors.

Key Sectors and Opportunities

Logistics and Last Mile

The logistics sector, particularly last-mile logistics, is experiencing significant growth, supported by several essential factors:

  • Land Scarcity: The limited availability of suitable land for urban logistics warehouses has led to increased rents and demand. Investors focus on strategic locations near urban centers to maximize delivery efficiency. This land scarcity drives investors to actively seek opportunities in peri-urban areas and reassess the use of existing spaces.

  • 2024 Olympic Games: Preparations for the Paris Olympic Games stimulate demand for logistics infrastructure. This major event requires efficient logistics to manage the increased supply, offering an opportunity for investors in this sector. Infrastructure projects and urban improvements for the Games also increase the value of properties near high-activity Olympic areas.

  • Increased Demand: According to the MSCI Barometer, 49% of investors anticipate an increase in demand for logistics warehouses, particularly those under 5000 m² intended for last-mile logistics. Additionally, 65% of respondents expect rent increases in this sector. This demand growth is fueled by the continued rise of e-commerce and consumer expectations for fast and reliable deliveries.

Hospitality and Healthcare Real Estate

The hospitality and healthcare real estate sectors are regaining investor interest for several reasons:

  • Post-COVID Recovery: The resumption of tourism and the normalization of travel post-pandemic reinvigorate the hospitality sector. The prospects for the 2024 Olympic Games further reinforce this positive dynamic, attracting investors to mid-range hotels that benefit from attractive capital returns. Hotels in popular tourist destinations and urban centers particularly benefit from this recovery.

  • Healthcare Real Estate: Demand for healthcare infrastructure remains strong, reinforced by the health crisis that highlighted the importance of quality healthcare services. Investors see this sector as a long-term opportunity, offering stability and resilience against economic crises. Clinics, hospitals, and care centers are particularly sought after, with increased attention to establishments capable of providing specialized and high-quality services.


The residential sector continues to attract institutional investor attention despite certain challenges:

  • Coliving and Student Residences: These sub-segments are favored due to their attractive returns and constant demand. Coliving offers a flexible solution for young professionals and students, while student residences meet the growing demand for student housing. These innovative residential models cater to the needs of a mobile and flexible population while providing stable returns for investors.

  • Management and Renovation Challenges: The management and renovation costs of residential assets are on the rise. This increase is partly due to strict rent control regulations and the need to upgrade buildings to meet environmental and energy standards. Investors must navigate these challenges while seeking opportunities to improve the energy efficiency and sustainability of properties.

  • Rent Control Regulations: Limitations on rent indexing and rent control regulations present challenges for investors. These measures, although essential for tenant protection, can reduce the profitability of residential investments. Investors must integrate these regulations into their strategy to ensure long-term profitability. Proactive property management and engagement in sustainable renovation projects can help mitigate the negative impacts of these regulations.

Challenges and Barriers to Investment

The French real estate market, while promising in certain sectors, faces several challenges that hinder investment. The 35th MSCI French Real Estate Investment Barometer highlights the main obstacles investors face.

1. Supply-Demand Imbalance

One of the major challenges highlighted in the barometer is the persistent mismatch between seller and buyer expectations. This lack of alignment creates significant obstacles to completing real estate transactions. Several factors contribute to this imbalance:

  • Asset Valuation: The divergence in asset valuation is a primary source of this imbalance. Sellers tend to maintain high prices based on past evaluations or optimistic prospects, while buyers seek discounted opportunities reflecting current economic uncertainties. The importance of real estate valuation experts becomes crucial here. These professionals provide independent and objective assessments, helping to establish realistic market prices. Their expertise bridges the gap between seller and buyer expectations, facilitating transactions.

  • Market Conditions: Volatile market conditions increase buyer caution, who hesitate to invest without significant price reductions or additional guarantees. This caution is exacerbated by economic and political uncertainties, making buyers more reluctant to engage in transactions without significant price adjustments.

  • Prolonged Negotiations: Negotiations between sellers and buyers are lengthening, delaying transactions and increasing the risk of missed opportunities. Differences in price expectations and sale conditions can prolong negotiation processes, leading to additional delays and frustrations on both sides.

2. Uncertainty in Fundraising

Uncertainty in fundraising for collective investment vehicles, such as SCPI (Real Estate Investment Companies) and OPCI (Collective Real Estate Investment Organizations), also affects the real estate market's liquidity. This uncertainty is caused by several elements:

  • Market Volatility: Economic fluctuations and global political uncertainties make investors cautious, resulting in slower or reduced fund collection. Investors hesitate to place their money in real estate funds when economic prospects are unstable.

  • Increased Competition: With more investment options available, SCPI and OPCI must stand out to attract capital, a difficult task in volatile times. Increased competition among various investment vehicles pushes fund managers to innovate and offer more attractive deals.

  • Regulations and Compliance: Growing regulatory requirements for transparency and fund management add complexity, making it more challenging to quickly and effectively collect the necessary capital for new investments. Investors demand more transparency and compliance, potentially slowing down the fundraising process.

3. Construction and Renovation Costs

High construction and renovation costs represent a significant barrier to real estate investment. According to the barometer, several factors contribute to these high costs:

  • Material Prices: Construction material prices have significantly increased, directly impacting the total cost of real estate projects. The inflation of material costs, such as steel, wood, and concrete, has a direct effect on construction and renovation budgets.

  • Labor Shortage: A shortage of skilled labor in the construction sector leads to higher wages and project completion delays. This shortage is exacerbated by growing demand for skilled workers, making projects more costly and longer to complete.

  • Environmental Regulations: Increased requirements for environmental and energy efficiency standards add extra costs to construction and renovation projects. Although these regulations are essential for long-term sustainability, they increase initial expenses for investors. Necessary upgrades to comply with energy standards can represent a considerable investment.

  • Decline in Construction Starts: The number of construction starts has decreased by 60% compared to the previous year, according to barometer data. This decline is mainly due to rising costs and economic uncertainties, reducing the supply of new projects in the market. The decrease in new constructions slows the expansion of the available real estate stock, increasing pressure on existing property prices.

Office Market

The office market in France is currently undergoing a profound transformation, strongly influenced by changes in work modes and company needs. Teleworking and the rationalization of office spaces are the main drivers of this evolution, leading to a reconfiguration of investment and space occupation strategies.

Teleworking and Space Rationalization

The COVID-19 pandemic accelerated the adoption of teleworking, durably altering the need for office spaces. Companies now seek to optimize their real estate costs by reducing the surface area of their premises and adopting hybrid work models. This trend translates into several dynamics:

  • Space Rationalization: Many companies are reducing their real estate footprint by favoring smaller but better-designed office spaces. Flexibility and efficiency become priorities, with growing demand for shared and modular offices. Traditional offices are giving way to multifunctional spaces that can quickly adapt to the changing needs of teams.

  • Flex Office and Coworking: The traditional office model is giving way to flexible solutions such as coworking and flex offices. These spaces offer increased flexibility, allowing companies to quickly adapt to fluctuating space needs. Coworking, in particular, reduces fixed costs and provides access to modern infrastructures without long-term commitments.

Demand in Île-de-France

Demand in Île-de-France, although under pressure, shows signs of gradual recovery. Forecasts for 2024 indicate a demand of 1.8 million m², with a slight increase expected for 2025 to 2.0 million m². However, challenges persist:

  • High Vacancy Rates: Vacancy rates remain high, particularly in peripheral areas such as the Western Crescent and La Défense. In 2023, the vacancy rate in Île-de-France reached 15.8%, with a forecast stabilization around 16.2% in 2024. These high vacancy rates reflect the difficulty in attracting tenants to less central areas.

  • Heterogeneous Demand: Demand is mainly concentrated in central and high-quality locations. Offices in less sought-after areas struggle to find tenants, worsening vacancy rates in these regions. Companies seek offices offering modern amenities and good public transport accessibility.

Investment Strategies

Faced with these challenges, investors are adjusting their strategies to focus on superior and well-located assets. Several trends are emerging:

  • Central Locations: Offices in central business districts, such as Paris QCA (Central Business District), remain attractive despite high rents. Demand for these locations is supported by their accessibility and surrounding infrastructure. These locations offer visibility and prestige that attract companies looking to enhance their brand image.

  • Asset Quality: Investors favor modern, well-equipped buildings that meet environmental standards and offer attractive services and amenities. Environmental certification and the ability to adapt to changing tenant needs are increasingly important criteria. LEED, BREEAM, or HQE-certified buildings are particularly sought after.

  • Adaptability: Buildings offering transformation possibilities to meet evolving company needs are particularly sought after. Flexible spaces, allowing for easy internal reconfiguration, are gaining popularity. These buildings can be easily restructured to adapt to team sizes and new work requirements.

ESG Strategies and Regulations

ESG (Environmental, Social, Governance) criteria play an increasingly crucial role in real estate investment decisions. Investors are adapting their strategies to not only meet regulatory requirements but also align their portfolios with sustainable and responsible practices. This evolution is driven by increasingly strict regulations and growing stakeholder demand for environmentally and socially responsible investments.

Adaptation of Investment Strategies

Real estate investors are modifying their strategies to proactively and effectively integrate ESG criteria. Here are some of the main adaptations:

  • Carbon Emission Reduction

  • Decarbonization Goals: Investors focus on reducing the carbon emissions of their real estate portfolios. This includes adopting green technologies, improving building energy efficiency, and integrating renewable energy sources.

  • Asset Renovation

  • Modernization and Energy Renovation: Investors emphasize renovating existing buildings to improve their energy performance and reduce their carbon footprint. This includes thermal insulation, installing more efficient heating, ventilation, and air conditioning systems, as well as implementing energy management systems.

Impact of ESG Regulations

ESG regulations impose strict standards that investors must comply with to avoid penalties and maximize the value of their assets. The main regulations include:

  • Tertiary Decree

  • Decree Objectives: The Tertiary Decree requires buildings over 1,000 m² to reduce their energy consumption by 40% by 2030, 50% by 2040, and 60% by 2050 compared to a reference year chosen between 2010 and 2020.

  • Compliance: Investors must conduct energy audits, implement performance improvement plans, and report annual consumption. Non-compliance can result in financial penalties and reputational damage.

  • Sustainable Finance Disclosure Regulation (SFDR)

  • Transparency and Reporting: The SFDR requires asset managers to disclose how they integrate ESG criteria into their decision-making processes. They must provide information on the negative impacts of their investments and demonstrate efforts to mitigate these impacts.

  • Financial Product Classification: Financial products are classified based on their alignment with ESG objectives, encouraging investors to favor sustainable and responsible products.

Consequences for Real Estate Portfolios

ESG strategies have significant implications for real estate portfolio management. Here are the main consequences:

  • Favoring Certified Assets

  • Market Attractiveness: Certified assets are increasingly demanded by tenants and institutional investors, increasing their market value and liquidity. Environmental certifications become a key criterion for real estate transactions.

  • Divesting High-Carbon Assets

  • Strategic Divestment: High-carbon-emission assets are becoming less attractive. Investors seek to divest these assets to reduce financial risk and comply with ESG regulations.

  • Capital Reallocation: Funds from the sale of non-compliant assets are reinvested in more sustainable projects, improving the overall ESG performance of the portfolio.

In 2024, the French real estate market is at a crossroads, facing significant challenges while offering opportunities for recovery and growth. Economic fluctuations, strict regulations, and new work dynamics have transformed the real estate landscape, necessitating rapid adaptation of investment strategies.

The logistics, hospitality, healthcare real estate, and residential sectors show promising signs, attracting investor interest despite obstacles. The stabilization of interest rates and adjustments in prime rates indicate a potential improvement in investment volume, marking a gradual regain of confidence.

In this complex context, the role of real estate valuation experts becomes crucial. Their expertise allows for objective and independent valuations, facilitating transactions and helping to overcome imbalances between buyer and seller expectations. They play an indispensable role by providing precise analyses and informed advice, guiding investors through a constantly evolving market.

To navigate effectively in this transforming market, investors must rely on reliable valuations and rigorous ESG strategies. Real estate valuation experts, with their in-depth knowledge and ability to interpret market trends, are essential partners in maximizing opportunities and minimizing risks.

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