The French market saw a total EUR 3.7 bn of investment in commercial real estate during the first quarter of 2008, about half the amount that was invested in the same period a year ago, according to a report released by real estate adviser CB Richard Ellis. The slowdown which started in the Ile-de-France region at the end of 2007 continued in 2008, with just EUR 2.3 bn worth of transactions recorded in the first quarter compared with a quarterly average of EUR 5bn in 2007. The drop was particularly noticeable in the well-established business districts of Paris and La Défense, while regional markets in the country seemed less affected by the downturn with investments totalling about EUR 1.2bn.
The French market saw a total EUR 3.7 bn of investment in commercial real estate during the first quarter of 2008, about half the amount that was invested in the same period a year ago, according to a report released by real estate adviser CB Richard Ellis. The slowdown which started in the Ile-de-France region at the end of 2007 continued in 2008, with just EUR 2.3 bn worth of transactions recorded in the first quarter compared with a quarterly average of EUR 5bn in 2007. The drop was particularly noticeable in the well-established business districts of Paris and La Défense, while regional markets in the country seemed less affected by the downturn with investments totalling about EUR 1.2bn.
CBRE said that the low level of activity in the most expensive markets is largely due to the sharp decline in the number of big sales. Only seven transactions of more than EUR 100mln were identified, four of which were portfolio deals. Above all, there was no mammoth deal in the first quarter as no transaction above EUR 250mln was recorded, CBRE said.
Offices accounted for 78% of investment at the start of the year, followed by the warehouse and industrial market (16%) and the retail industry (6%). Foreign investors seem to be adopting a more cautious approach to the French market than domestic ones, whose share in total acquisitions has risen to 47% over the last three months. Institutional investors accounted for 23% of the investment volume, while property companies held on to 30% of the investment. The development of investment vehicles in France has benefited investment funds that were responsible for 44% of transactions in the first quarter.
Yields are continuing to rise in most sectors (between 25 and 50 basis points for the best assets), but the market has maintained a degree of fluidity at yields of 5% to 6%, according to CBRE. The firm expects the investment market to start picking up again in the second half of the year, thanks mainly to a buoyant rental market.
