The real estate development market - France (2024)

1.2 The global market

Global professional real estate investment market World, ****-****, in thousands of billions of dollars Source: ****

According to MSCI, the real estate market, including property development, will be worth US$**,*** billion in ****, driven mainly by the Americas, which account for **.*% of the total market.

Top ten real estate markets by country World, ****, in billions of US dollars Source: ****

The real estate market is growing thanks torapid urbanization. Today, **% of the world's population lives in urban areas, and this figure is set to rise to **% by **** due to migration to cities, which are sometimes transformed into megacities as a result. [***] This urbanization is driving demand for residential and commercial real estate.

According to Pierre Papier, in ****, ** cities accounted for **% of the global commercial real estate market, with New York in first place. Among the top **, ** cities are in North America, * in Europe and * in Asia.

In Europe today, there are a number of cities that are driving this economy:

Source: ****

German cities (***) account for over **% of the top ** European markets for real estate investment in ****. The only French city in this ranking is Paris, in *nd place.

1.3 A growing French market dominated by housing sales

According to INSEE, the real estate development market in France will amount to **.* billion euros in ****. with the exception of ****, the market has been in a period of steady growth since ****, with a growth rate of over **% between **** and **** and + *.*% over the period **** to ****. However, by ****, the market will have shrunk by *.**%.

The NAF code for this sector is **.**, which encompasses :

**.**A: real estate development of buildings primarily for residential use, and real estate development of hotel residences **.**B: development of office buildings **.**C: the development of all types of non-residential buildings, except office buildings

Sales growth in the real estate development sector (***) France, ****-*****, in billions of euros Source: ****

In ****, there will be **,*** people working in the sector, an increase of *%, and *,*** companies, a figure stable compared to the previous year.

Breakdown of real estate development business volume France, ****, % (***) Source: ****

In ****, the sector generated sales of *** billion euros, with a significant contribution from specialized works companies (***). Major players include Nexity, Altarea and Bouygues Immobilier. The real estate market is also growing, with ***,*** housing starts, mainly for first-time buyers. [***]

According to the Fédération Française du Bâtiment. Construction activity in **** will break down as follows:

**.*% for ...

1.4 The impact of Covid-19 on the real estate development sector

Building sector figures for **** reveal the impact of the health crisis. In new construction, there was a **% drop in residential construction and a fall of over **% in non-residential construction. The granting of building permits is also down by almost **% on ****.

There are many causes for this: obviously, there's the slowdown in building sites due to containment situations, curfews, the drop in public orders, numerous postponements of projects for households most financially impacted, and the **** municipal elections, which saw a sharp slowdown in stances in favor of urban planning. In addition, the property loan system has been tightened, with new rules requiring a financial contribution, a maximum debt ratio of **% and a **-year term. [***]

But developers have thus taken advantage of the situation to speed up office-to-housing conversions, provided for under the **** ELAN law, to make up for the lack of new-build activity. According to the FFB (***), **** is also likely to see a **.*% drop in housing starts over time, and a housing shortage could potentially see the light of day due to all the complications mentioned above.

For real estate developers in France, **** will be marked by the search for building land, due to its scarcity[***]

However, if we focus on single-family ...

2.1 A market dependent on many factors

According to Les Echos, the main wishes of residential buyers are to live in an individual home, with more space, close to shops, transport, places to live and work, to be able to respect their budget constraints, to acquire an energy-efficient home, and to have access to support services for their purchase. To meet these motivations, real estate developers are focusing on cities, offering support services and building low-energy housing.

Housing demand

The number of housing starts in France fell between **** and **** by *%. In ****, ***,*** homes were started. This number is lower than in previous years, due in particular to a slowdown in the economy caused by inflation, and is even below the **** level.

number of housing starts France, ****-****, in thousands Source: ****

On the other hand, the nature of these homes has changed. While the number of single-family homes started has fallen in ** years, the number of residential units started has risen sharply, from **,*** in **** to **,*** in ****. However, by ****, all housing types have seen a significant decline.

Number of housing starts by type France, ****-****, in thousands Source: ****

Non-residential demand

Non-residential demand similarly experienced a sharp slowdown between **** and ****, before rising by more than **% from **** to ****. In ****, the area started will ...

2.2 Booming demand for warehouses

The chart below shows the evolution of warehouse take-up in France for each half-year between **** and ****. There are strong fluctuations over the period studied, with, for example, a decrease of almost **% between the *ᵉ semester **** and the *ᵉʳ semester ****, or an increase of almost **% between the *ᵉʳ semester **** and the second semester of the same year. Thus, we cannot quite distinguish a clear short-term trend. However, we can say that in the long term, demand is trending upwards, having risen from ***,*** m² in H* **** to *.* million m² in H* ****, an increase of **.*% in * years.

Warehouse take-up by half-year France, ****-****, in millions of square meters of floor space Source: ****

This increase in demand for warehousing space is mainly due to the needs generated by e-commerce, which requires ever greater storage space. Amazon (***), C Discount and Boulanger, for example, are creating new space in the Paris region and in western France. [***]

By ****, e-commerce will have passed the ***.* billion euro mark (***). [***]

2.3 A worsening household situation since 2022

The ease of home ownership remains highly dependent on the economic health of French households, with indicators illustrating a fragile situation since ****, according to the Fédération des Promoteurs Immobiliers.

Firstly, household investment in housing is in sharp decline, having fallen by *% in volume terms over **** as a whole. This downward trend, which began at the end of **** with the rise in interest rates, has continued, with an even more pronounced decline of -*.*% in Q* ****. At the same time, household consumption expenditure remained slightly positive for **** as a whole (***), despite the decline in purchasing power due to inflation, which still stood at +*.*% in January ****.

The household confidence index, although slowly improving, remains at low levels (***). This modest rise is partly attributed to a slight deceleration in inflation.

Finally, demand for mortgages continues to fall. Interest rates on home loans, which averaged *.**% in December ****, are restricting access to financing for many households, particularly first-time buyers. As a result, monthly home loan production has fallen from **.* billion euros in May **** to just *.* billion euros in December ****.

evolution of the average rate for home loans of all maturities France, ****-****, in Source: ****

2.4 Real estate and home ownership for young people

Generation Z, comprising young people born between **** and ****, is characterized by its deep immersion in a digital universe. Unlike Generation Y, who experienced the transition to digital, Gen Z has developed its relationships and values in a fully connected context. It attaches particular importance to values such as transparency, inclusion and tolerance, while aspiring to security, particularly through real estate acquisition.

Real estate aspirations

Although often perceived as unstable, this generation remains attached to the idea of becoming a homeowner: **% of **-** year-olds consider this objective a priority. This aspiration is fueled by a need for security in a context of uncertainty, marked by challenges such as climate change and geopolitical tensions. Some **% want to buy to secure their home, while **% see it as a way to prepare for retirement.

Digital influence and social pressure

Owning property is also associated with social success, a perception reinforced by social networks. The popularity of Instagram and TikTok has heightened the pressure to become a homeowner, with success stories constantly being highlighted. This phenomenon gives rise to a feeling of FOMO (***), prompting young people to take action to avoid feeling left behind.

New needs and expectations

The health crisis has influenced young people's housing ...

2.5 Who are real estate buyers?

In ****, IFOP carried out a survey of *,*** people representative of the French population to draw up a profile of residential property buyers in France.

**% of buyers are under **.

Age of property buyers France, ****, % of total Source: ****

With regard to the socio-professional category of buyers, contrary to all expectations, it is not the CSP+ (***) who buy the most, but the CSP- who represent **% of buyers.

Socioprofessional category of property buyers France, ****, % of total Source: ****

Nearly **% of property purchases are made in the French provinces. The east of the country registers the highest acquisition rates: **% in the south-east and **% in the north-east, followed by the north-west with **% of acquisitions.

Property acquisition locations France, ****, % of total Source: ****

The vast majority of buyers are couples.

Marital status of property buyers France, ****, % of buyers Source: ****

Purchases mainly concern houses (***).

Type of property purchased France, ****, % of total Source: ****

3.1 Real estate development value chain

The real estate developer is not an isolated player; on the contrary, the act of real estate development requires the involvement of many players upstream, during the project and downstream. The main ones are as follows:

The project owner. This is the person who commissions the project and defines the specifications. In the construction industry, project owners can be private households, the State and local authorities, social landlords, or the developers themselves. The project manager. This is the entity responsible for designing the project, overseeing the work and coordinating the various trades. They require the services of architects, engineering consultants, surveyors, etc. Construction companies. They intervene once the design is complete. They take care of masonry, envelope, carpentry, joinery, insulation, electricity, heating.. End customers. The end customer may be the client in the case of a single-family home, for example, but otherwise end customers are generally households, companies, the State, real estate companies, etc.

3.2 Companies and their characteristics

For company and employee statistics, the following NAF codes are used:

**.**A: this code covers the development of buildings primarily for residential use, and the development of hotel residences **.**B: this code covers the development of office buildings **.**C: this code covers the development of all types of non-residential buildings except office buildings, i.e. : Buildings intended to house industrial production activities, e.g. factories, workshops, assembly plants, etc. Hospitals, schools Hotels, stores, shopping malls, restaurants Airport buildings Sports halls Covered and underground parking lots Warehouses Religious buildings

Growth in the number of companies in the real estate development market France, ****-****, in units Source: ****

We can see that for all real estate development activities combined, the trend has been upward in terms of the number of companies since ****. In ****, the number of housing and office property development companies fell slightly, while the number of other property development companies rose to ***.

Number of employees in the real estate development sector France, ****-****, in units Source: ****

Regardless of the real estate development business under consideration, all have steadily increased their headcount since **** (***). Indeed, this increase in salaried headcount has been **.**% for housing development, **% for office development, and **.**% for development of other ...

3.3 How a real estate development project works

The criteria for success are rapid marketing and, above all, ensuring that the end result is in line with budget forecasts. To achieve this, a real estate development operation always follows the same stages:

Launching the project after studying the opportunities Control of the land on which the project will be carried out Study of the project's technical, financial and commercialfeasibility Construction of the project, which includes architectural studies, obtaining building permits, and construction itself Marketing the project by finding a buyer or buyers Projectcompletion and delivery

On average, the project completion phase takes between ** and ** months, although this can vary considerably depending on the scope of the work to be carried out and the obstacles that may slow down progress. [***]

3.4 Financing a real estate development project

Real estate development projects can take a long time to get off the ground, and the revenues generated usually don't arrive until quite late, so it's essential to find financing to bring these projects to fruition. There are * main sources of financing[***] :

Pre-sale of homes or buildings to companies accounts for **-**% of total financing Bank financing accounts for **-**% of total financing Equity contribution accounts for **-**% of total financing. This personal contribution is a condition imposed by the banks Real estate crowdfundingis emerging, but remains in the minority. It is used to supplement the equity provided

Typical financing structure for a real estate development project France, % of total Source: ****

3.5 The reaction of real estate developers to the crisis of 2023

The real estate development sector in France underwent profound changes in ****, with a notable **% drop in new housing reservations compared to the previous year. This difficult situation can be explained by the rise in interest rates, making access to credit more complex for households. Industry leaders such as Nexity, Altarea and Bouygues Immobilier saw their combined revenues fall to *.* billion euros, down from *.* billion euros in ****. Despite these obstacles, some developers are managing to adapt by adjusting their strategies to the new market conditions:

Nexity, in first place, is experiencing a **% drop in its order book. In response, the company has launched a plan to improve profitability by ****, using part of the funds generated by the sale of its branches to reduce debt. Nexity is also counting on a new brand dedicated to urban regeneration to support future growth. As for Bouygues Immobilier, whose business is based mainly on the residential sector, the crisis has also had an impact. The company plans to reduce its workforce by **% in ****, following a **% reduction in ****, while diversifying its offering and strengthening its commitment to the residential segment to adapt to lower sales. Altarea, for its part, has shifted its business model towards block sales, ...

4.1 Main contracts and services

A real estate developer is primarily concerned with individuals, investors and companies with a real estate project. Generally speaking, property developers offer property development services, as well as many other services related to their core business.

In terms of real estate development, they offer contracts for :

Vente en L'Etat Futur d'Achèvement (***): in this case, the buyer becomes the owner of the land once the sales contract has been signed, and then the owner of the home once it has been built. Property development: a mandate obliges the property developer, for a price agreed with the client, to carry out a building construction program, and to perform or commission all activities required for construction.

There are also other, more specific contracts, such as asset co-development, leasing contracts (***), etc.

Developers can also offer the following services:

Property Management: rental and technical management, as well as administrative and legal oversight of real estate assets. Consulting and Transaction: advising companies and individuals on their real estate investment strategies. Fit-out : definition of a fit-out program for the interior of a building adapted to the customer's needs, and execution of the work. Monitoring and trends: identifying new solutions and proposing them to customers to better meet ...

4.2 Disparities in housing prices

The average price per m² of housing in France will be €*,*** for an apartment and €*,*** for a house in ****. Over the ****-**** period, prices per m² for apartments and houses have grown at an average annual rate of *.**% and *.**% respectively.

evolution of house and apartment prices per square meter France, ****-**** Source: ****

In ****, Paris holds the title of the most expensive city in terms of price per m* for both apartments and houses. It is followed by Nice and Lyon, in second and third place respectively.

Price per m² in France's major cities France, October ****, in euros Source: ****

Source: ****

Over the short term, house prices have fallen by around *%. However,over five years, there has been a significant increase of **.*%.

House price trends France, ****, in Source: ****

Yann Jéhano, President of Laforêt France, asserts that **** has been an extremely dynamic year for the French real estate market, in particular since it is the second best year on record in terms of transaction volume. This context remains very favorable for older properties, and less so for new-build, which has been much more affected by the health crisis. This real estate craze is due to several factors:

City dwellers have suffered from ...

4.3 The popularity of smart buildings

In ****, Smart Buildings will account for *** million euros, *% more than in ****. Projections show a **% increase in sales for smart buildings in **** compared with ****. [***]

The DRIEAT Ile de France defines the concept of smart buildings or intelligent buildings as "the integration of active and passive energy management solutions, aimed at optimizing consumption, but also promoting user comfort and safety while complying with current regulations." In particular, these buildings must improve and absorb peak consumption situations.

The smart building is in fact a new generation of housing, described as more intelligent, because it allows for finer management and control of energy, comfort and safety systems for residents.smart buildings are also designed to fit into larger intelligent ecosystems (***) that should, in part, enable the construction of buildings that are less polluting and more energy self-sufficient.

This type of solution, using innovative technologies often proposed by start-ups, should also enable less costly and more efficient implementations, which are gradually winning over various key players in the sector: electrical equipment manufacturers, integrated players in the sector, but also digital players (***)[***]

Software is being developed to help building owners use the data collected by sensors in smart buildings to draw intelligent conclusions. Examples include Spinalcom and ...

4.4 A dynamic market benefiting from innovation

According to the Crédit Foncier/CSA barometer, the level of optimism among healthcare professionals has fallen in recent years, from **% in **** to **% in ****. For ****, there are marked disparities : the morale of land developers, promoters and builders is down, while that of real estate agents is up **%.

Real estate professionals' level of optimism about the future of housing France, ****-****, % (***) Source: ****

Given that the real estate developer business is not experiencing strong growth, many players are expanding into new markets. The main ones are services for residences (***) and asset management.

Real estate crowdfunding is a new form of financing that is beginning to gain considerable momentum as a means of supplementing the equity capital provided by real estate developers. A number of platforms offer this type of financing, including Fundimmo, Lymo, Wiseed and Anaxago.

*D virtual tours are becoming increasingly popular. New technologies, such as virtual reality headsets, have enhanced the customer experience. Many real estate developers have begun to develop offers along these lines. According to Bien ici, this saves time for future buyers, who visit an average of six homes before finding the one that suits them best.

The real estate development sector is also impacted by the ...

5.1 Regulatory framework

The real estate development business didn't emerge in France until the late ****s, which is when the legal framework began to take shape. Today, this activity is closely supervised, particularly for residential real estate, to guarantee the safety of future residents.

The main laws in France are

The law of January *, **** which regulates the sale of buildings to be constructed The law of July **, ****regulating operations carried out by builders The law of January *, ****which deals with liability and insurance in the construction sector. Construction defects and apparent defects must be covered by guarantees, as builders are presumed to be liable.

Article ****-* of the French Civil Code defines real estate development as follows: "The sale of a building to be constructed is one by which the seller undertakes to erect a building within a period of time determined by a contract. It may be concluded on completion or in a future state of completion. In addition, article ****-* of the French Civil Code governs the status of real estate developers, defining a real estate development contract as a mandate for the construction of a real estate structure that the client entrusts to a real estate developer.

The New Acoustic Regulations ...

6.1 Segmentation

• Bouygues Immobilier
• Vinci Immobilier
• Eiffage Groupe
• Nacarat (Groupe Robot Dutilleul)
• Nexity
• Altarea Cogedim
• Icade
• Kaufman & Broad
• Pichet groupe
• Les Nouveaux Constructeurs Bassac
• AST Groupe
• Sogeprom
• BNP Paribas Real Estate France
• Marignan
• Lazard Group Real Estate
• Réalités Promotion
• Sopic
• Compagnie de Phalsbourg
• Frey
• Duval Groupe
• Groupama Immobilier
• Unibail-Rodamco-Westfield
• Arche groupe Immobilier
• Socri
• CEETRUS Auchan
• SCC
• CDC Habitat
• Constructa
• Spirit Immobilier
• Apsys
• KS Groupe