‘La Ville Lumière’ (Paris) is no longer the only destination for foreign investors keen to enter the French market as regional cities like Lyon, Lille and Toulouse are seen as increasingly attractive, PropertyEU’s France Investment Briefing has head.
‘La Ville Lumière’ (Paris) is no longer the only destination for foreign investors keen to enter the French market as regional cities like Lyon, Lille and Toulouse are seen as increasingly attractive, PropertyEU’s France Investment Briefing has head.
‘Demand is strong and not just in the Ile de France, as city growth is occurring in the whole of the country and there are many decent-sized towns outside of Paris with increasing populations,’ said Marcus Cieleback, head of research at Patrizia Immobilien, which has a large residential portfolio in France. ‘The momentum is such that French regional cities are attracting interest from German investors, which is a totally new development.’
While the pre-eminence of Paris is not in question, other cities are coming to the fore as markets worth investing in. Lyon, France’s second-largest city, is a particularly interesting example, said Paul Raingold, President of Générale Continentale Investissements: ‘It is a city of 1.5 million people with a strong history, a young population, good transport infrastructure and a very interesting local market. Rents have not moved for a year and that is unlikely to last.’
Both the residential and the retail markets are poised for take-off in regional cities, as demand for housing increases with population growth and the economic recovery leads to rising consumer confidence. Shopping centres are being bought and redeveloped, while office and industrial buildings offer opportunities for residential conversion.
‘There has been steady growth in regional markets,’ said Michael Walton, Chief Executive of Rynda Property Investors, which mainly invests in French regional cities. ‘US investors are now actively looking around these markets, but they usually want to spend €400m which is just impossible in markets of this size.’
Foreign investors, especially American or Asian, are usually attracted by large deals of €150 mln and over which can only be found in Paris, but they are now becoming more open to alternatives, delegates at the PropertyEU briefing heard.
Another factor has been French institutions taking advantage of yield compression to sell their portfolios, usually to increase the average quality of their assets. Foreign investors, frustrated by the high competition and lack of available prime assets in central Paris, are leaping at the opportunity.
Residential investments, which remain an attractive bond surrogate, need not focus on Paris alone now. ‘Yields are low, but capital growth will gain importance in the total return performance.’