French market sees investment volume rise 40% in 2010

Investment volume in France rose 40% in 2010 to EUR 12 bn, according to figures from BNP Paribas Real Estate. For the year ahead, the Paris-based adviser is forecasting a more modest rise to around EUR 13-14 bn, Thierry Laroue-Pont, CEO of Real Estate Advisory France, said during a presentation last week.

By 2013, investment volume should be back to around the long-term average of EUR 15 bn, he added. At the peak of the market in 2007, investment volume mushroomed to EUR 31 bn.

The adviser attributed the strong growth in 2010, which was boosted by an end-of-the-year surge, to improved financing conditions thanks to government measures to limit ther impact of the crisis. As a result, investors have been able to borrow more and at historically low interest rates. Property yields have also proved to be stronger and less volatile than other asset classes, such as bonds or equities.

'Lastly, some of the underlying markets appear to have weathered the crisis, such as retail premises, new buildings with guaranteed cash flows and classic Parisian freestone buildings, which remain a safe haven for investors,' Laroue-Pont said.

The strong increase reflected the return of major deals, with the volume of deals for more than EUR 100 mln jumping by some 75% year-on-year. One of the biggest deals was Invesco Real Estate's acquisition of two buildings in the 8th arrondissement for EUR 143 mln.

Office deals accounted for the bulk of the transactions, or 64% of the total, but retail was also in favour at 23%. Strong competition for guaranteed assets has pushed Prime office yields down to between 4.5% and 5% in Paris' Central Business District.

German investors were the biggest source of foreign investment, accounting for 19% of total transactions. US investors came second with 6% while UK buyers drove 4% of all deals.

Insurers doubled their share of transactions in 2010, accounting for 25% of the total. Listed real estate companies (SIICs) generated 11% of all deals.