France’s real estate market is tipped to bounce back following the country’s final presidential election round this weekend.
Europe’s second largest commercial investment market is, according to Fidelity International, set to enjoy favourable leasing activity and investor appetite after a tentative first quarter.
En Marche! candidate Emmanuel Macron – a visitor to last year’s MIPIM in Cannes – is now favourite for the presidency, although he has to take on Front National’s Marine Le Pen.
The pre-election quarter saw real estate investment down 30% on its long-term average to €3.6bn.
Iryna Pylypchuk, senior European real estate analyst at Fidelity International, says French fundamentals remain strong, with a return to normal transaction levels expected post election.
Commercial real estate investment, she said, is expected to return to a quarterly norm of around €6bn to €9bn.
“Occupier market fundamentals are solid and, in most markets, the letting activity is in-line or just above the long-term average,” Pylypchuk said. “Space under construction, especially in the office sector remains muted.”
Speaking at the annual INREV conference last month, José Luis Pellicer, head of research at Rockspring Property Investment Managers, said the prospect of Le Pen becoming president had “unknown implications” for real estate.
The Netherlands’ recent election of Mark Rutte as prime minister – followed by the probable election in France of centrist Macron, could, as INREV chief executive Matthias Thomas told the association’s delegates, “redress the balance”.
The Dutch economy, Fidelity said, kept the momentum even after coalition negotiations started in mid March, with 2017 GDP growth expectations revised upwards to 2.1% in April.
In France, Amundi’s global head of research, Philippe Ithurbide, said that, if polls are accurate and Macron prevails, “much of the uncertainty will be lifted and we can now look at France and the French markets with a much lower risk premium, concentrating on the fundamentals”.
Conversely, a Le Pen victory would result in “significant depreciation of the new currency in circulation”. A loss of both purchasing power and competitiveness of firms would lead to the destruction of jobs and production.
According to Green Street Advisors, the result of France’s second-round presidential election will move real estate stocks come Monday morning. Risk to real estate investment trust (REIT) share prices appears “asymmetric”, given polls are saying that Macron will win comfortably.
“No matter how much we try to purely focus on real estate fundamentals when picking stocks, sometimes political noise is just too loud to ignore,” the firm said in a note this week.
With Macron the favourite, Green Street said it is “unlikely to know what the market turmoil a Le Pen victory would instigate on Monday morning”.
