Major Increases in Commercial Real Estate Investments in Paris

After a solid year in 2017, commercial real estate in Île-de-France if off to a good start in 2018, accelerating again in the second quarter in terms of investment and activity.  

Over the first half of the year, investments in commercial real estate reached 9.1 billion euros in Île-de-France – where most investments in France are concentrated – and increased by more than two-thirds compared to the same period of 2017, according to the quarterly survey of the economic interest grouping Immostat.

The total area of property sales and office rentals, or demande placée, has increased by 15% to 1.3 million square meters, says Immostat, the organization that brings together real estate consulting companies BNP Paribas Real Estate, CBRE, Cushman & Wakefield (formerly DTZ) and Jones Lang LaSalle (JLL).

These evolutions are even more remarkable in the second quarter alone where investments have more than doubled. Office sales and rentals grew by 28% in terms of floor space and, on purchases alone, the average price rose 4% to 6,460 euros per square meter.

Large operations are the most successful, with an increase of almost 30% in the total floor space sold or rented for premises of more than 5,000 meters, according to the details of BNP Paribas. Still, the rise is general, since the small and medium-sized premises have risen by only 7% in comparison.  As consequence of this booming business, office supply is shrinking sharply in the region, with a 12% decline to some 3 million square meters immediately available.

Who is Buying?

The 23rd MSCI Barometer on the question of French real estate investment has also revealed important investor profile data. We have learned that the most active are insurance companies, civil real estate investment companies, and real estate mutual funds. Unlisted fund management companies rank third. The survey also reveals that at the time of purchase, 72% of these investors favor offices, an increase of 9% since the 22nd edition of the Barometer. At the same time, housing interest continues to rise, with purchase intention climbing from 6 to 10%.  Low interest rates have created a windfall effect. Investment in shopping centers, on the other hand, seems to be declining.

Another major reported trend: foreign investors are gaining ground in operations. According to details given by CBRE, they represent nearly half of transactions in Île-de-France since the beginning of the year.