High national debt, rising bond yields and political deadlock will make France one of Europe’s weakest commercial real estate markets over the next five years, despite increased demand in the hotel, retail and industrial sectors, according to a report by Oxford Economics.
The report, authored by senior economist Leo Barincou, reveals that commercial real estate values have declined across the Eurozone since 2021, but have fallen further in France.
Citing MSCI data, Barincou disclosed that at the end of 2025, French commercial real estate values were 16.6% off their peak, with property values expected to decline a further 0.8% this year.
According to the report, “France carries one of the highest government debt burdens in Europe, and political deadlock means we expect its debt level to continue rising. Markets have reacted by pricing in more risk for owning French government bonds, and higher bond yields will hold back France’s commercial real estate recovery.
“France’s political fragmentation has left no clear path towards fiscal consolidation,” the report noted. “We expect French government debt to exceed 120% of GDP by 2027 and to continue rising. The yield on 10-year French government bonds now exceeds 4.2% and is higher than the yield on Italian government bonds. Combined with its weak economic outlook and high exposure to office, we forecast France to be one of Europe’s weakest-performing commercial real estate markets over 2026-30.”
However, Oxford Economics said despite this challenging backdrop, selective opportunities exist. Tourism growth and e-commerce expansion are expected to support demand for hotels, retail and industrial properties.
“We expect these sectors to post the strongest performance in France over the next five years,” the report stated.
MSCI data shows property values for industrial, hotel and retail assets are already recovering from recent lows, rising by 1.4%, 1%, and 0.5% respectively.
A strong bounce in tourism is driving this recovery in hotels and retail. France remains a top global destination, and its cities perform exceptionally well on visitor spending. While Paris sits behind London for European tourist numbers, it ranks first for overall tourist spending. Meanwhile, Nice-Cannes ranks 27th for visitor numbers in Europe, but ninth for total spending.
The report added that the 2027 presidential election in France could bring more stability if the winning candidate secures a strong parliamentary majority.
“This outcome could open a path towards gradual debt consolidation. However, any meaningful deficit reduction would also slow economic growth. The exact effect would depend on the measures used, but we estimate the scale of the adjustment needed to bring the deficit under 3% would shave an average 0.3 [percentage points] off annual GDP growth over 2027-30.
“Instead, our baseline outlook expects political fragmentation to persist well after the 2027 elections. This means that France’s next government will continue to kick the public finance can down the road. Although this option avoids the sharp near-term drag from fiscal consolidation, it also prolongs the existing climate of high uncertainty, and it further increases the size and cost of the eventual adjustment.”
In both cases, France’s underperformance worsens compared with the rest of the Eurozone. If current trends hold, on top of its uniquely poor fiscal position, the country is likely to become one of the slowest-growing economies in the euro bloc, further exacerbating its debt dynamics and putting its bond market under greater scrutiny, Oxford Economics said.
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