Commercial and Office Property Market in France: 2016 Performance and 2017 Prospects
Recent analyses have shined a light on the commercial and office property market in France last year, both nationwide and in the capital. The outlook for 2017 is mostly positive, although some believe the market cycle is peaking with a trough to follow. Details.
With the focus often on residential property markets, it’s important not to forget that office and commercial property markets are an integral part of the economy. The figures for the whole of 2016 have recently become available thanks to several notable surveys that also help to gauge the sentiment for the coming year.
According to a study by the Royal Institute of Chartered Surveyors in France, the fourth quarter of 2016 saw a fifth consecutive rise in the demand for office property in France. The figures for light industry slowed while commercial space stagnated, and supply was higher for for-sale properties as opposed to rentals.
This difference in supply might be down to an increasing perception that the market it is ‘at a peak’, and that some stagnation in the near-term is inevitable. According to IRCS’s survey in Q4 2016, 42% believed this, up from 25% in Q3. The overall confidence in the strength of the market also fell from quarter to quarter, though remains strong: +35 in Q4, down from +38 in Q3.
Ile-de-France is outperforming the rest of the country, as expected. The region remains the fifth biggest destination worldwide for office and commercial property, with a total of 52.8 million m2 (London leads the rankings, for now). Analyses by ORIE and Frank Knight estimate that a total of 19.5 billion euros poured into the region’s tertiary property markets, which Frank Knight writes is a 13% increase on 2015’s figures. Of this total:
- 80% went into office property
- 12% went into commercial property
- 8% went into light industry property
However, a scarcity of high-quality office properties is holding back the office property market in France. It is also leading to a bifurcation of rent performance between higher-end – which is seeing growth – and lower-end – which is seeing stagnation. This mirrors the lack of high-quality luxury properties in Paris’ luxury residential market, indicative of Paris’ wider need to renovate and refurbish ageing infrastructure.
Overall, the outlook for the coming 12 months is positive, with confidence among tenants, property owners and industry players still high, albeit falling. With uncertainty around Brexit and the presidential election on everyone’s mind, analysts are wary of sounding too confident about 2017.
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