Institutional investors in France are turning to riskier asset profiles due to the scarcity of prime product on the market, according to Nicolas Verdillon, head of CBRE's Capital Markets in France.
Institutional investors in France are turning to riskier asset profiles due to the scarcity of prime product on the market, according to Nicolas Verdillon, head of CBRE's Capital Markets in France.
'Just six months ago, the motto was security, security, security, but today investors are shifting towards non-prime investments, because of a lack of supply,' Verdillon old PropertyEU in an interview. 'Investor appetite for French real estate has come back, alongside a return of risk premium due to the increasing cost of money.'
Yields for prime office properties have come under pressure, moving by 125 basis points from 6.5% in the third quarter of 2009 to 5.25% at present, he added. 'As a result, some institutional investors who cannot afford to buy at 5.25% are now easing up on their investment criteria, in terms of good location, good tenants and well-let properties, in order to be able to get a 6% yield,' he said.
So far, office properties have represented over 60% of investment activity, with retail accounting for 30% of total volumes and logistics just 6%.
The size of investments is also growing bigger with the largest deals increasing from EUR 50-65 mln in 2008 and 2009 to up to EUR 250 mln at present. Verdillon: 'We have analyses showing that a number of investors are in the position to pursue larger products.'
In Q1 2010, about EUR 1.4 bn worth of commercial real estate changed hands in France, more than double the amount transacted in Q1 2009 (EUR 715 mln). The figure is, however, still far from the record EUR 3.5 bn invested in the last quarter of 2009. CB Richard Ellis is expecting investment activity in France to be around EUR 10 bn for the entire 2010 year, up from EUR 6.5 bn in 2009.