FRANCE - French property investments more than halved in value in 2008, however experts are confident activity will pick up, according to the Aberdeen Property Investors' French quarterly property snapshot.
The worsening economy, tighter credit control and investor uncertainty led to drastically fewer French property deals last year, to the total sum transacted was €13bn in 2008 compared with €30bn in 2007.
Paris was particularly affected, as transaction levels in the capital dropped 58% compared to 35% in the regions, according to Thomas Beyerle, head of global research at Aberdeen Property Investors.
"There is little increase in transactions. By the end of the year (2009) I think we will see a mean of -30% compared to 2008. This is not a booming scenario but shows a lot of opportunities for investors who have money and who are looking for core products under the prospective of long-term holding."
According to Beyerle, greater transparency and speculation that the Parisian market has reached the bottom will encourage institutional investors to invest in the region.
"I think we will see activity from pension funds and probably sovereign wealth funds if you can find them. We have not many seen transactions but we expect to see more by the second quarter of 2009," said Beyerle.
API's report suggested French property total returns are unlikely to turn positive before 2011, and are expected to reach an average of 3.8% over the next five years.
Rental growth is expected to turn negative for 2009-2010 across all segments and is predicted to range from 0-1% over the same time period.
Relative to the European EU Property benchmark, Aberdeen recommends investors remain neutral in retail, underweight in industrial and overweight in offices if they wish to outperform.
And given that buildings measuring between 300 and 1000 square metres no longer require the approval of the Commission Departementale d'Autorisation Commerciale, new investors will be able to enter the retail market, claimed the firm.
Take-up in the office sectors in Paris and other main cities fell 15% in 2008, as cost-cutting forced some companies to seek cheaper space in peripheral locations, and making these tghe most resilient to economic downturn.
"The disparities between periphery and secondary and third locations versus Paris are getting wider and wider," said Beyeral.
The industrial sector has suffered from investors and developers either postponing or cancelling their speculative developments as they wait for the letting market to pick up again. Demand for light industrial space, however, is expected to remain strong.
Aberdeen Property Investors currently manages around €28bn of direct and indirect property investments.
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