French property investment heads for €14b mark - JLL

French real estate investment - dominated by the Greater Paris region - topped €8 bn in the first half of 2014. This represents an 85% increase year-on-year and hits levels not seen since the peak in 2006-7, according to JLL.

Based on the deals already completed and what remains on the market, JLL anticipates a full-year volume of between €12 bn and €14 bn.

The Greater Paris region is the motor of the French investment market and volumes continued to rise there in the second quarter, reaching €5 bn.

Large transactions made a significant contribution to this strong performance, with two large sales recorded in the second quarter: the Risanamento office portfolio sold to Olayan Arabian Packaging Company and Chelsfield for €1.1 bn and Beaugrenelle shopping centre in Paris sold to an Apsys-led French investment consortium for €700 mln.

Even if these two exceptional transactions are excluded, the market still grew by 14% compared with the first half of 2013 to reach €5 bn, an equivalent level of activity to 2012.

JLL said that French investors continue to play a significant part in transactions for more than €100 mln, accounting for eight of the 12 transactions in the second quarter. International investors are marginally the dominant force, representing 54% of total amounts invested out of the half-year’s large volumes.

PRIME YIELDS
In terms of yield, Paris CBD remains stable at between 4% and 4.5%. In La Défense, yields have contracted slightly and now range from 5.5% to 6%. Despite prime yields being close to their record low, historically low yields from French OAT treasury bonds, at around 1.6 %, maintain an attractive risk premium of around 230 base points.

Considering the products currently on the market and products which could become available over the year, JLL believes the second half of 2014 should return to a usual level in terms of amounts invested.

Staffing problems for both buyers and sellers are slowing transaction times, which is having a knock-on effect on market activity, the adviser added. 'It is regularly taking an extra 1 to 2 months to complete on all deals,' said Stephan von Barczy, head of French capital markets at JLL. 'We are already working on products that will be sold next year,' he added.