Commercial real estate review for Q3 2023: investment down 51%, logistics demand down 24% - Savings Guide

🏠 Home > 📰 News > 🏠 Real Estate News > 🏢 Commercial Real Estate News > ImmoStat's Q3 2023 figures released by BNP Paribas Real Estate were not as bad as expected. Excluding a drop in investment and a strong decline in demand for the logistics sector, demand for office space ultimately fell by only 12% year-over-year.

Commercial real estate: overview of Q3 2023 by sector

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Commercial real estate

Commercial real estate crisis

Real estate in France

Published on Tuesday, October 10, 2023

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The office market in the Ile-de-France region in the 3rd quarter of 2023

"Demand for office space in Ile-de-France stands at 1,351,600 sqm for the first nine months of 2023, down 12% year-on-year, compared to a 39% drop at the end of the first quarter. The recovery continues, especially in the third''s decline in demand with 115,000 sqm placed (-20%). "The level of large searches in Ile-de-France remains stable in September with 108 projects and more than 1.1 million sqm marked by our teams and should support the volume of placed demand in the coming quarters," explains Eric Siesse. In summary, "Even if the economic outlook is darkening in France, the office market in Ile-de-France has once again shown excellent resilience. Users are thus continuing to realize their real estate projects. We forecast a transaction volume of around 1.85 million sqm for the whole of 2023," anticipates Eric Ciesse.

Logistics real estate: unfavorable development

The logistics sector in France: demand,'' he says. 'reaching over 2.6 million sqm in the first nine months of 2023.

"Despite strong fundamentals, user volumes in 2023 are declining with over 2.6 million sqm placed in 167 transactions in the first nine months of the year (transactions over 5,000 sqm, including Class C warehouses) across France," analyzes Franck Poise, co-director of the industrial sector at BNP Paribas Real Estate Transaction France. This setback (-24% compared to last year) is mainly due to the strong reduction in property and rental accounts, a direct consequence of the sharp increase in construction costs and the rising cost of financing. Thus, if market supply is stable at 3.8 million sqm as of October 1, 2023, the construction volume (736,000 sqm,''down 30% on last year) is decreasing significantly. In most markets, rents are rising due to a shortage of land and available supply (the average vacancy rate in France is 2.50%).

Investments: down 51% year-on-year.

Only 10.7 billion euros invested since the beginning of the year.

"Volume''Investment in commercial real estate in France shows a particularly low level with €10.7 billion invested in the first nine months of 2023 (-51% year-on-year),' points out Olivier Ambrosiali, deputy general manager for the sales and investment direction at BNP Paribas Real Estate Transaction France. "Offices remain the most sought-after asset class with more than €5.3 billion raised since the beginning of the year (-49% YTD), but there are noticeable deep differences depending on geographical location. Regions show greater resilience (€1.5 billion; -32% y-o-y) compared to Ile-de-France (€3.8 billion; -54%)." Trade, after a first quarter that saw several large''transactions, is also slowing down, showing a total volume of €2.2 billion after nine months (-54% compared to last year). The logistics and production facilities segment shows the largest decline with €1.7 billion invested (-67% year-on-year). In contrast, the hotel sector continues to show its resilience with 1.4 billion euros invested (-3% year-on-year). "The very high volatility on the financial markets is affecting real estate. Thus, yields on 'prime' properties are being cut by 25-50pc between logistics and office in the last three months of the year", states Olivier Ambrosiali. Since the beginning of 2022, the reduction in rates on 'prime' properties has ranged from 80 p.p. for commercial real estate to almost''200pc for offices in the outskirts. "Over several quarters, subsequent central bank rate rises have been having an impact and some investors are reconsidering their allocation strategies between different assets. However, ongoing rate adjustments between buyers' and sellers' expectations continue to slow the market. In this environment, commercial real estate investment in France should reach around €15 billion for the whole of 2023, roughly in line with the volumes recorded in 2010-2011," adds Olivier Ambrosiali.