Total returns on French retail property declined to 3.1% in the second half of 2013, resulting in an annual retail return of 6.9% for the full year, according to the latest IPD France Biannual Property Index.
Total returns on French retail property declined to 3.1% in the second half of 2013, resulting in an annual retail return of 6.9% for the full year, according to the latest IPD France Biannual Property Index.
Retail values continued to rise - albeit by just 0.4% in the last six months - thanks to stable yields and increasing market rents. This improvement was particularly evident for shopping centres, despite rising vacancy rates, while the value of other retail assets remained stable.
By contrast, half-yearly capital growth for offices remained negative at -0.9%, though this represented an improvement against the previous half year, while there were substantial differences by market segment. Once again, Paris was the only part of the office market where values rose. For the full year ending December 2013, the overall office return stood at 3.3%.
'These results are starting to show some signs of improvement in the office sector, including on West CBD - La Défense, but the vacancy rates are still high. Capital values continue to fall outside Paris, though less rapidly than before, while the Parisian market is strengthening,' said Stéphanie Galiègue, executive director and head of Southern Europe, IPD.
Compared with other asset classes, the direct property return of 2.5% for H2 2013 trailed that of equities, which registered the strongest performance at 15.7% (MCSI FR), well up on their H1 return. Meanwhile real estate equities returned a positive performance at 5.9%, while OPCI unlisted funds (formerly RFA, measured by IPD in collaboration with ASPIM) returned 2.7%. However the return to direct real estate remained above that for government bonds (JP Morgan GBI Global, FR 7-10 years) at 1.2%.
The IPD France Biannual Property Index is based on 1,229 directly-owned properties in 42 separate portfolios, with a total value of €26 bn as at 31 December 2013. Retail represents 49% of the total value of the assets covered by the Index, against 34% for offices, 13% for logistics/industrials and 4% for other types of property.