The French commercial property market is becoming more competitive as domestic investors and foreign capital compete for assets, delegates heard at PropertyEU's latest France Investment briefing.
Improving economic fundamentals, the Brexit effect, new investor-friendly measures and a positive lending climate are all contributing to making France more attractive. 'There is interest from all over the world, but the problem is beating the French to deals in their own market,' said Larry Young, director of international investment at BNP Paribas Real Estate.
New capital
Domestic players continue to dominate the field, exploiting their presence on the ground and their knowledge of the market to represent 63% of capital invested last year. North America has contributed 15% and the UK 6%, the same percentage as the Middle East and Asia, the briefing held at the London offices of law firm Gide Loyrette Nouel.
'There are always new sources of capital available and all the big sovereign wealth funds continue to invest in France,' said Young. 'In the last six months we have seen a wave of South Korean money coming in, with a couple of big deals under offer at the moment.' The Chinese are also showing an interest in investing beyond the hotel and retail sectors they have so far favoured.
'France has so much to offer,' said Benjamin Cartier-Bresson, head of representative office France at Berlin Hyp. 'But if you want to make a large, €100m-plus transaction and you want a stable cashflow and liquidity then you have to be in Paris.'
The competition for product, however, is pushing investors to look beyond the capital. ‘With a lack of core assets in Paris and large amounts of capital available, foreign investors are inevitably looking at other cities, not just Lyon but Bordeaux or Nantes as well,’ said Hugues Moreau, Partner at Gide Loyrette Nouel, the leading French international law firm. ‘We are doing more and more deals in the regions.’
Logistics
The Logistics sector is less dominated by domestic players, who control less than 40% of the market, with over 60% in the hands of foreign investors. ‘Americans have traditionally been the biggest investors but capital is coming from everywhere, including sovereign wealth funds,’ said Francois Rispe, Managing Director, regional head, Southern Europe at Prologis. 'The market will strengthen in the next few years, driven by e-commerce and supply chain reconfiguration. Supply has been limited so the bottom line is that rents will definitely go up.'
France may have a reputation for high taxation rates and excessive regulation among some investors, but it is acting with speed and determination to attract others, said Moreau: 'One example is the speeded-up procedures to obtain a permit so that British alternative investment managers present in France under the passporting regime can continue operating in the country, ensuring continuity after Brexit with a so-called ‘two-week ticket.'
Investors' sentiment on France is so positive that they are not unduly worried about next year’s elections. 'It will be very much business as usual, with no dramas,' said Rispe. ‘The feeling is that not only it will not be any worse than it is now, but that it probably will be better, because some much-needed reforms might be implemented.’ Cartier-Bresson agreed: 'Reforms in France have usually taken place under duress, but with a new government they may be implemented willingly and with the people’s consent, which would be a positive.'
