According to Aberdeen Property Investors’ latest French Property Snapshot, commercial investment activity in 2010 is likely to see a +30% increase on the level attained in 2009, a level still significantly lower than the record volumes of 2006 and 2007.

In early 2010, financing conditions have continued to improve and lending margins, for core investments with a 50% loan-to-value (LTV), have now reached 1.2%.

During this year, Aberdeen Property Investors expect to see yields fall further at the prime end of the market, whilst secondary assets will remain illiquid. During 2009, the most severe office rental declines were recorded for prime stock in the Paris CBD, Neuilly-Levallois and the South Periphery, at about -20%. In 2010, the think-tank expects occupier demand to remain weak and net absorption to remain negative.

The spending slowdown in 2008/09 had a polarising effect in the French retail market, with demand for secondary locations fading. New project deliveries are likely to stay on a high level in the near-term. Aberdeen Property Investors expect further rental declines in 2010, albeit at a lower pace, therefore a moderate rental recovery is expected for 2011 onwards.

Jana Savova, international investment strategy analyst, said: “The French commercial property market was the first to enter the recovery stage of the cycle within continental Europe. We expect the recovery to occur in two stages, with an investment market driven bounce in capital values, followed by an improvement in total returns driven by the rental market.”