The national vacancy rate now stands at 3.1%, a 50bps decrease since last quarter. This is pushing up rents, especially in locations with lower-than-average vacancy.

As an example, the Rhone-Alps region (where vacancy stands close to 0%) saw a 9% increase in prime rents during the quarter⁶. Long-term, this severe supply and demand imbalance should remain. On the one hand, demand for logistics and industrial assets should continue its upward trend given that (i) the French e-commerce penetration lags that of comparable markets⁷, and (ii) France has become a prime target for European reindustrialisation thanks to its cheap, low-carbon and reliable nuclear energy, coupled to a strong national road and train infrastructure.

On the other hand, supply should continue to struggle to keep up due to: (i) new policies being enacted by the government to limit greenfield developments⁸ and (ii) inflationary pressures on construction costs adding uncertainty for developers and slowing new construction starts.

This makes investing in fully permitted ground-up developments, where development yield premiums are attractive and construction prices fixed or capped, a compelling proposition.

Furthermore, the reindustrialisation of France creates opportunities to acquire sale and leasebacks on mission-critical industrial assets.

• 6/Source: CBRE
• 7/Source: Centre for Retail Research. France’s e-commerce penetration rate in 2021 was 15%, well below comparable markets, for example, 29% in the UK and 22% in Germany
• 8/New greenfield developments limited by the Zéro Artificialisation Nette (ZAN) policy, which requires a 50% and 100% reduction in greenfield development by 2030 and 2050, respectively. The policy was implemented through the “Climat et Résilience” law of August 2021