Commercial real estate tested by the crisis

Tuesday, 2 march 2021

Despite a decline of nearly 30% compared to the exceptional performance achieved in 2019, the real estate investment market remained active in 2020.

The experts at BPCE Solutions Immobilières (real estate solutions) have analyzed the performance of the commercial real-estate market in France in the fourth quarter of 2020. With aggregate investment reaching 26 billion euros, the market returned to its 2015-2017 levels. Particularly affected by the health crisis, the office rental market in the greater Paris region suffered from a wait-and-see attitude on the part of users (whose activities have, at times, been sharply curtailed) and from a reduced need for office space following the widespread adoption of teleworking solutions. 

Investment real estate: greater competition for premium properties
Investment in commercial real estate remained remarkably dynamic in 2020, with transaction volumes up 14% compared with the past 10-year average. However, the gap is continuing to widen between so-called ‘prime’ high-quality properties, which saw their value increase in 2020 for office buildings and logistics facilities, and so-called ‘second-tier’ properties (less well located, less financially robust tenants, etc.), which saw volumes contract over the period.  

Market for office space: demand in free fall
In contrast, the office rental market in the Paris region suffered a sharp decline, with a collapse in user demand (-45%) and leases signed for a total of only 1.3 million square meters, a level not seen since the 1990s. This led to a significant increase in supply (+36%), exacerbating downward pressure on rental values for both new and existing office space. 

Commercial real estate: an annus horribilis

Commercial real estate, deeply impacted by the series of lockdown periods decided by the government, also faced a particularly difficult year in 2020. Rents are clearly on the decline, penalized by a significant increase in vacancies.  

With 200 employees, 23 regional offices and 15 European agencies, BPCE Solutions Immobilières is a major player in real estate consultancy ranging from appraisals, strategic analysis and project management assistance to the marketing of assets.