Acute shortages in prime office and retail stock are prompting French developers to re-start building on a speculative basis after over three years of cautious pre-let building activity, according to Cushman & Wakefield.

'Having improved their finances in the past months, developers and land owners now have a strong motivation for developing on a speculative basis due to the lack of offer in the market,' Olivier Gérard, president of C&W France told PropertyEU. 'Although we have seen just a few signs of this renewed interest so far, the general market feeling is that developers are holding on to their developable land, not allowing opportunistic investors to enter the projects,' Gerard said.

He expects the market to see a shift in 2011 from core to valued-added assets as a result of a scarcity of core product and investors' search for value. Gérard: 'Like other European markets, the investment community in 2010 remained exclusively focused on core assets. Opportunistic players are still having a hard time entering the market. They might get a chance to do so with the renovation or transformation of existing buildings when the debt market opens up again in the second part of 2011.'

According to Gérard, only 20% of the 4 million m2 office park in Paris is brand-new or recently refurbished, highlighting the need for redevelopment of existing properties.

In 2010 a total of EUR 11 bn of commercial real estate traded in France, up 40% on 2009 volumes of EUR 7.8 bn but still below the past 10-year average of EUR 14 bn. Gérard expects the market to return to normal trading activity in 2011 with a forecast 20% increase in investment volumes to EUR 13-15 bn. Retail significantly increased its share of the investment market last year, accounting for one-third of transactions. With EUR 3.6 bn worth of retail properties changing hands, the sector was the clear winner, reporting an increase of 90% year-on-year.

'In France the retail market has historically been difficult to access,' Gérard explained. 'Companies that were trying to raise funds in 2010 opted for selling the most liquid assets - which are retail properties.' Offices still represent the lion's share of the market accounting for 61% of volumes.