The decline in investments in French commercial real estate accelerated in the second quarter as concerns about the sector mount over the impact of soaring interest rates.
(Bloomberg) — The decline in investments in French commercial real estate accelerated in the second quarter as concerns about the sector mount over the impact of soaring interest rates.
Total investor deals for properties including offices, retail space and warehouses dropped 61% compared to a year earlier to €2.5 billion ($2.7 billion), the lowest level in at least three years, according to a report from Immostat.Â
This is the third quarterly decline in a row and compares with contractions of 35% and 52% in the previous two quarters. The data compiles transactions over €4 million from four brokers, including BNP Paribas Real Estate and Cushman & Wakefield Plc.
Commercial property markets across Europe have seized as buyers and sellers struggle to agree on pricing. Rising interest rates have driven up borrowing costs, prompting potential property investors to demand higher yields. That results in lower offer prices, and owners are resisting granting steep discounts to book values on concerns that could cause debt ratios to surge.Â
Read More: German Commercial Property Deals Tumble 50% to Five-Year Low
Investments in the Paris area also dropped 61% to €1.8 billion, as prices continued to decline. The average office price in the region fell 9% to €7,420 per square meter, its lowest level since the third quarter of 2019.Â
In the region, the total floorspace of new sales or rentals of offices occupied by their buyers, also known as office take-up, fell 19% to 421,000 square meters over the quarter. At the same time, the immediate supply of offices keeps growing, gaining 10% from a year earlier to 4.5 million square meters.
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