Strong interest from foreign investors, coupled with rising rental levels and an incipient economic recovery will make 2015 a good year for the French real estate market, market experts agreed at PropertyEU’s France Investment Briefing, which was held in London on Wednesday at the City offices of TIAA Henderson Real Estate.
Strong interest from foreign investors, coupled with rising rental levels and an incipient economic recovery will make 2015 a good year for the French real estate market, market experts agreed at PropertyEU’s France Investment Briefing, which was held in London on Wednesday at the City offices of TIAA Henderson Real Estate.
The positive sentiment is backed up by solid numbers: figures from CBRE for the first three months of 2015 show a 10% increase in commercial real estate investment volumes to €4.3 bn compared to €4 bn in the year-earlier period.
‘Investments have been increasing steadily since 2009 and last year reached a total of €24.1 bn,’ said Nicolas Verdillon, executive director of capital markets at CBRE in Paris. ‘In France the upturn has started later than in the UK and is happening at a slower pace than Italy, but it is a steady and sustainable recovery.’
Francois Rispe, managing director and regional head for Southern Europe at Prologis, noted that ‘France is always stronger in volumes and size of transactions than Spain or Italy and investors’ interest is increasing. The economy is finally turning and we can expect real positive change in 2015.’
Foreign investors have noticed and are increasing their presence in the market, the briefing heard. The traditional dominance of domestic investors has been challenged and indeed reversed: the French share has shrunk to below 50% for the first time, totalling 44.3% in the first three months of 2015.
Among foreign investors, North Americans continue to lead the pack and last year increased their presence to 18.4% of the total, while Middle Eastern players have also significantly upscaled their interest, reaching 11.3% of the total. Asian investors, meanwhile, have been getting a toehold with a 5.4% share.
Closer to home, German investors have shown a greater interest with a 7.4% share, while the British are the exception with a slight decrease to 4%, possibly due to media-fuelled negative perceptions of France’s economic prospects.
The panel agreed that the rankings will change this year, as Asian investors are likely to overtake both their American and Middle Eastern counterparts to take the number one slot. ‘It is easy to predict that Asian investments will be much higher by the end of this year, as we are already seeing the signs,’ said Verdillon. ‘There is real pressure to invest and also real competition, as ME investors are also more present as a share of the market, while North Americans who have focused on the added value side are now moving into core investments.’
The average number of transactions declined 37% in the first three months of 2015, but volumes have stayed almost constant, pointing to a shift towards bigger deals in the market, partly driven by the influx of foreign investors.
Already this year the market has seen 10 investments over the €200 mln mark and this is a positive trend, said Verdillon: ‘The segmentation below €50 mln deals is shrinking, which makes us feel much more comfortable with the market this year. It is more homogeneous and more balanced.’