About EUR 23 bn was invested in France in the first nine months of 2007, compared to EUR 20 bn in the year-earlier period, property consultant Atisreal said in its latest research report published on Tuesday. Far from weakening, the investment market remained buoyant in Q3 with about EUR 8 bn invested, up 18% on the 2006 figure, the firm said.

About EUR 23 bn was invested in France in the first nine months of 2007, compared to EUR 20 bn in the year-earlier period, property consultant Atisreal said in its latest research report published on Tuesday. Far from weakening, the investment market remained buoyant in Q3 with about EUR 8 bn invested, up 18% on the 2006 figure, the firm said.

Two phenomena are keeping the investment market busy at the moment, according to Atisreal: the health of the user market and the abundance of medium-term liquidity. For these reasons, investment in 2007 is forecast to outstrip 2006, but fall short of breaking the EUR 30 bn mark.

Nevertheless, the consultant expects 2007 will mark the end of a period of uninterrupted growth in investment volume and declining initial yields. The financial market turmoil over the summer and the ensuring fall in supply and possible mismatch with demand is set to squeeze investment, with 2008 unlikely to break this year's record levels.

The months ahead will be challenging and more complex as investors will be pickier and financing terms tighter. The share of equity required for a deal has already risen and using leverage to boost profitability will no longer be as easy and frequent as in the past. This is bound to lead to a recalculation of risk premiums and therefore a corresponding rise in initial yields. Demand will be less speculative and more demanding with respect to initial yields, and stagnation is possible in early 2008, Atisreal said.

Over the first nine months of 2007, acquisitions by foreign investors in France totalled EUR 15 bn, or about two-thirds of the total. The size of deals in the French market is on the rise as the volume of non-portfolio transactions worth over EUR 100 mln exceeded EUR 10 bn this year, about two-thirds of the total.

Offices are still the most sought-after type of assets, particularly in Ile-de-France, where they account for 87% of investment. Here prime office yields have reached their turning point and will start to climb back up again. Atisreal expects prime yields to be about 4% next year in Ile-de-France, while in Paris outside the Central Business District, prime yields should climb to 5%.

Investment in offices in Ile-de-France exceeded EUR 15 bn, a 7% rise on the same period in 2006. But in the outlying regions investment failed to break the EUR 1 bn threshold, due to scarcity of supply.