French property volumes advance at snail's pace

French real estate investment volumes grew only slightly in 2013 while comparable Europe real estate markets recorded big increases.

A total of €15.1 bn was invested in the French commercial property market in 2013, up slightly on 2012 and fairly close to the average figure of the last 10 years, Cushman & Wakefield has reported.

The property adviser said that demand for the most emblematic properties remained strong despite the lack of supply, reflechting also a renewed interest in slightly higher risk assets and 'confirming the attractiveness of the French market for a wide variety of investors'.

That said, Germany and the UK, which together with France form the 'Big Three' European real estate markets, left France far behind in terms of growth in investment volumes during 2013. The total transaction volume for Germany reached €30.4 bn last year. This represents a rise of 20% year-on-year and the highest investment volume since 2007 when a total of €56 bn was achieved. The UK saw volume increase by about 20% in 2013.

Cushman & Wakefield said large transactions in France helped compensate for the fall in the total number of large transactions (393 in 2013 vs 421 in 2012 and 451 in 2011). Some 36 large transactions over €100 mln accounted for 48% of total investments in France in 2013. However, the breakdown of investments shows that the €50-100 mln category was the most active, making up for 52 transactions versus 39 in 2012 and €3.7 bn versus €2.7 bn in 2012.

The Ile-de-France around Paris was the driver of the market. With €11.1 bn invested in 2013 compared to €11 bn in 2012) Ile-de-France was home to 74% of the property investments made in France in 2013 and to 27 out of the 36 transactions over €100 mln.

Offices accounted for 78% of investments in Ile-de-France in 2013 versus 81% in 2012. Retail property investments in Ile-de-France also remained fairly stable compared with the previous year at 17% in 2013 versus 15 % in 2012 thanks to the completion of several large-scale acquisitions of emblematic, mixed-use properties (e.g. 65-67 Champs-Elysées and 8 Place Vendôme), shopping centres (like Passy Plaza) and portfolios with a large share of properties in Ile-de-France (such as the Altaprime portfolio).

Property investments made in the provinces in 2013 remained fairly stable at €4 bn compared with €3.9 bn in 2012, but were up by 18% on the 10-year average. Retail investments remained the driver of activity in the provinces. Thanks to the sale of retail arcades and large shopping centres, the retail share was up slightly, accounting for 51% of investments in 2013 compared with 49% in 2012, with the office share slipping slightly from 28% in 2012 to 26% in 2013.

There were, however, notable differences between regions. The Rhône-Alpes region was the leading region in 2013, accounting for a quarter of all investments to have taken place outside Ile-de-France or €970 mln. This was mainly due to several large investments in new office properties and in retail and industrial schemes.

Cushman & Wakefield is in the main upbeat on the prospects for the French investment market in 2014. 'Whilst fiscal uncertainty remains and the declining performance of the lettings markets is likely to weigh on investments, there should be an increase in volumes invested in commercial property in France in 2014. Several large or very large transactions are already underway, demonstrating the high level of equity available for investments and the continued demand from long-term institutional investors (insurance companies and sovereign wealth funds) for core assets. Furthermore, vendors making more concessions and renewed interest from opportunistic players will work in favour of higher risk properties, confirming the attractiveness of the French market for an ever wider range of investors.'

Click on the link below for Cushman & Wakefield's full report on the French market.