France sees investment in commercial real estate tumble by 52%

FRANCE saw investments in commercial real estate fall by more than half in the final quarter of 2022, a sign that rising interest rates are weighing on activity.

Total deals for properties including offices, retail space and warehouses tumbled 52 per cent to 5.4 billion euros (S$7.7 billion) in the fourth quarter, according to a report from Immostat, which compiles data on transactions by investors over 4 million euros.

In the Paris area, the trend was more severe, with deals declining 62 per cent to 2.5 billion euros.

Europe’s real estate sector is becoming increasingly volatile as rising interest rates make borrowing more costly and affect demand for property. The deteriorating dynamics prompted Bank of France governor Francois Villeroy de Galhau last month to call on the central bank to remain attentive to commercial real estate risks.

In the fourth quarter, the average office price in the Paris region fell 1 per cent to 7,980 euros per square meter, the lowest level since the third quarter of 2020.

For the full year, investment in commercial real estate declined 2 per cent to 25.5 billion euros across France and fell 3 per cent to 15 billion euros in the Paris area. BLOOMBERG