Investors are looking beyond Paris to regional French cities in their search for more opportunities, more choice and better yields, experts agreed at the PropertyEU European Outlook H2 2017 Investment Briefing, which was held in Paris at the end of June.
‘Start-ups and technology companies are moving to where costs are lower for the companies and for the employees, so a lot of young people are moving into regional cities,’ said Raphael Tréguier, CEO of French office REIT Cegereal. ‘It is the start of a long-term trend that will see these cities develop and grow in contrast with the huge Paris area.’
The capital will always be the first port of call, especially for foreign or first-time investors, but regional cities are set to attract a growing share of capital.
‘There will be a decrease in demand for noisy, polluted Ile de France in favour of the South, and we are already seeing a lot of tech companies moving to places like Bordeaux, Lyon and Marseille,’ said Alain Chaussard, CEO of French REIT Affine. ‘Prospects are also extremely positive for Lille, which benefits from its geographical position in the centre of Europe and from excellent transport links to Paris, the UK and the rest of Europe.’
The hunt for yield is another big factor, he said: ‘Investors are unable to find the yields they are looking for in Paris, so they are moving to the regional cities where yields are substantially higher.’ According to BNP Paribas Real Estate figures, prime office yields are 3.15% in Paris and on a downward trend, but they are at 4% in Lyon, 5.75% in Marseille and 5.90% in Bordeaux.
Strong infrastructure network
France’s good infrastructure network and high-speed trains that connect the different cities make the decision to move much easier for both companies and employees, the briefing heard.
Another factor driving investors to the regions is lack of product in the capital. ‘It is becoming a problem because we are a little bit stuck,’ said Tania Bontemps, présidente of Union Investment Real Estate France. ‘The dynamic is there and the motivation is there, but product sourcing is increasingly complicated.’
Diversification, by geographical area as well as by asset class, has become ‘a must’, she said. ‘We have had to go up the risk curve, even if it is not in our DNA, moving to core-plus and value-add, development and speculative opportunities.’
In Paris as well as in the regions, the trend seems to be in favour of city centres, both for offices and for residential, and it is driven by young professionals who want to live near where they work.
‘People tend to concentrate on downtown areas and avoid the suburbs,’ said Chaussard. ‘This will lead to changes in the sector, with more small apartments with larger social areas. A kind of student housing for professionals, which does not really exist in France yet but will surely take hold.’
