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New Market Report: France Real Estate Report Q4 2013

Recently published research from Business Monitor International, "France Real Estate Report Q4 2013", is now available at Fast Market Research


Boston, MA -- (SBWIRE) -- 11/20/2013 -- The fate of the eurozone's second largest economy will draw increasingly into focus this year, as France attempts to rein in its financial woes against a backdrop of flatlining economic activity. While our Infrastructure team remains cautiously optimistic on the French construction sector in 2013, the commercial real estate sector is anticipated to remain lacklustre and without growth over the 12-month period. Nevertheless, small shifts in the country's dynamic may well inject some life into the sector over the medium term, as the development pipeline picks up.

Despite positive improvements in business confidence readings, the overall picture remains weak for France, with leading indicators affirming a lacklustre start to the year for commercial real estate. Investment volumes into the sector in H113 declined for the first time since 2009 - in spite of a regional uptick, the economy remains sluggish and rental rates flat. Nevertheless, commentators are more optimistic for the latter part of the year going into 2014 with several mega-deals and projects on the horizon. As a result, despite certain bright spots such as high-end retail and the upcoming UEFA football championship in 2016, we maintain a bearish outlook for France's commercial real estate sector, particularly over the short term.

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Key Points

- We continue to forecast that France's construction industry value will contract by 1.9% in real terms over 2013. This is supported by official data that indicated the industry registered negative growth of 2.5% in H113. The industry has been contracting consecutively for the past five years and we expect the recession to continue through to 2013 as we see little scope for a recovery in France's macroeconomic outlook. We forecast contraction of 0.3% in real GDP growth for 2013, which will be a significant impediment to any recovery in the construction sector. We are, however, more optimistic for 2014 when we expect positive growth to return to the construction industry - at 1.5% y-o-y. - From a medium-term perspective, the lack of economic reforms (particularly with regards to the labour market and tax system) remains the main impediment towards robust real GDP growth, restricting growth in both the household segments (through sticky unemployment and lower purchasing power) and net exports (high labour costs driving lack of export competitiveness). Over a shorter horizon, the government's inability to pursue expansionary fiscal policy due to EU budget targets, and weak demand for exports from major trade partners (primarily in the EU) will cause sustained economic stagnation.

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