Unlocking France: Real Estate Opportunities Amid Local Complexity

Written by Jorge Aguinaga

International interest in French real estate remains strong, yet the pathway to investment is marked by significant complexity. 

At GRI Club’s recent France International Talks meeting, senior real estate leaders gathered to evaluate the evolving market scenario, identifying segments with enduring appeal while also confronting the structural challenges that differentiate France from its European peers.

Structural Demand

As discussions suggested, asset classes driven by structural demand, such as logistics, student accommodation, and prime Paris offices, continue to attract capital despite the many hurdles being faced. 

Logistics, in particular, retains its strategic relevance. Participants agreed that demand is not easily challenged by e-commerce or hybrid work, highlighting its resilience compared with sectors more exposed to digital disruption. 

While growth may have tempered, the fundamentals remain compelling, with limited land availability and regulatory barriers reinforcing the value of existing stock.

Student housing also received attention as a sector where demand is robust and pan-European strategies are emerging. 

In contrast, the senior housing segment was described as still “digesting” supply. The overall outlook for these specialised residential segments is positive, but contingent on close alignment with end-user needs, not merely investor appetite.

Cross-border Insights

Discussions between these preeminent industry decision-makers covered the feasibility of importing global strategies into the French market. The key question is therefore: can an international recipe be simply applied, or must it be localised?

While commercial real estate models, especially in logistics and business premises, can be more readily replicated across borders, residential strategies require nuanced adaptation - a perception driven by regulatory, fiscal, and cultural differences. 

Another issue facing France is the extent to which residential leases are seen by many foreign investors as unusually complex to deal with, as the regulations change frequently.

Another one of the key differentiators observed as existing between France and markets such as Germany or the Netherlands is the greater level of state involvement in housing. 

From lease structures to subsidies, residential investments in France must navigate layers upon layers of public regulation that make pan-European scaling far more difficult than in commercial asset classes.

Local Expertise

Ultimately, success in France hinges not only on strategy, but on relationships. The prevailing sentiment is that local partnerships are absolutely essential to ensuring successful deployment in the country. 

Foreign investors, especially newcomers, face a steep learning curve in navigating permitting delays, planning inconsistencies, and fragmented administrative structures. 

This extends beyond regulatory knowledge to include cultural fluency, political understanding, and practical experience with France’s multi-layered bureaucracy.

Without this alignment, international capital is prone to misjudging timelines, costs, and operational risk, potentially leading to significant losses.

Default Entry Point

Another recurring theme was the tendency for foreign investors to use the UK as a gateway or “stepping-stone” before expanding into continental Europe. 

Despite being seen to offer less depth, the UK is perceived as more navigable, partly due to the English language and London’s position as a global financial hub.

Participants agreed that while France and other European markets offer potentially richer opportunities, they also require a great deal more in the way of local knowledge. 

This returns to the importance of maintaining awareness of soft barriers such as linguistic, cultural, and procedural factors, which continue to influence capital flows.

Capital-Product Mismatch

While investor interest in France’s residential sector remains significant, the underlying product offer is considered to be misaligned with institutional demand. 

Participants pointed to a clear dichotomy: foreign capital is searching for build-to-rent (BTR), scalable, yield-generating housing, yet the French market is dominated by second-hand units and short-cycle redevelopment plays.

Most importantly, France’s housing shortage has not translated into an investable pipeline. The prevailing sentiment is that the market is being structurally held back, not by lack of capital, but by the absence of political will and coherent policy frameworks.

Municipal Resistance

The root of the problem, as attendees agreed, is not solely regulatory - but political. Local councils were described as a key barrier to development, with discretionary control over zoning and permitting often used to restrict new housing supply. 

This resistance is particularly acute in coastal and high-demand areas, where opposition to densification is strongest. 

As a result, developers face a fragmented and inconsistent approval landscape. In contrast to countries where national housing targets guide local policy, France’s decentralised approach is seen to be impeding the housing engine, even as the market faces acute undersupply.

Pricing Misalignment

In terms of investment returns, the French market presents another paradox. The cost of capital has shifted, yet seller expectations and valuations have not fully adjusted. 

The gap between achievable returns and capital costs is particularly wide in Parisian residential and office markets, where yields remain compressed despite rising debt costs.

In many cases, valuations are still based on legacy assumptions, leading to what one expert described as “buildings that will never again be prime still being priced as if they are”.

This sentiment has contributed to France’s declining position in global investor rankings. Referencing recent data, one speaker noted that France has now slipped to fifth place, behind the Netherlands, Italy, and Spain, in terms of cross-border investor preference. 

“We’re not seen as a market where you can do core and value-add at scale,” they concluded.

Capital Agility Shift

Participants also noted that capital is shifting to more agile markets, with Spain and Italy being cited as markets with greater pricing flexibility and less political obstruction. 

Investors in these countries are reportedly more willing to engage in distressed or transitional deals, supported by lenders and public institutions willing to take greater risk.

In France, meanwhile, market actors are described as slow to adapt, with appraisers, lenders, and developers all contributing to the lack of inertia. 

Despite widespread concerns, however, there are signs of change. Discussions at the event suggested that pricing is beginning to correct, and that international capital is showing renewed interest in revalued assets, particularly in Paris.

Looking Ahead

Despite concerns about inconsistency, attendees acknowledged that France remains open to international capital. 

From a legal perspective, there are few actual barriers to entry. The challenge is execution, navigating delays, aligning expectations, and understanding local specificities.

In response, market leaders reiterated the need for smarter partnerships and deeper investor education. 

As discussions suggested, the way forward is not deregulation, but clarity, consistency, and collaboration.