Q3 DEALS: French real estate revels in investment bounceback

The investment market in France is set to top €20 bn in 2015 and exceed €13.2 bn for the first nine months of the year, according to international real estate advisor Savills.

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TOP FRENCH DEALS
First nine months of 2015

Source: PropertyEU Research
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1. Chinese SWF, AEW scoop €1.3b European Celsius mall portfolio
2. Ivanhoé sells €1.2b of Paris offices to Gecina, raises stake
3. Icade Santé to buy French healthcare package for €651m
4. Abu Dhabi SWF bags Paris office project for €477m
5. Constellation closes €330m purchase of iconic Paris hotel
6. Allianz to acquire Nice mall from Unibail-Rodamco at 5% yield
7. SLI property club deploys €300m across 5 deals in Europe
8. Malaysian pension fund inks €220m deal in Boulogne
9. Altarea-Cogedim buys out 50% Orion fund share of €400m mall
10. Chuc Hoang buys Paris' Nikko hotel for €200m

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Savills noted that the volume for the first nine months of 2015 is 16% down on the same period in 2014. Yet, investment activity has accelerated over the last few months after an extremely disappointing second quarter.

Since the beginning of the year, the market has been restrained by the lack of product and strong investor demand has consumed the larger, quality product. Activity from international investors, who are generally big-ticket investors, has been limited. The share of cross-border investment decreased slightly from 32% a year ago to an estimated 36% in Q3. Americans accounted for 9% of the total volume, followed by Germans (7%) and Asians (6%).

The investment market is predominantly driven by French institutional investors (29%) and investment funds (21%) and the typical deal size bracket has been €100 - €500 mln, for both single assets and portfolios. Nevertheless, the third quarter has witnessed larger deals, notably the Celsius shopping centre bought by Chinese SWF CIC and the Ivanohé office portfolio bought by Gecina (€1.2 bn).

Sector
In terms of breakdown per asset, offices account for 71% of the total investment volume compared to 59% a year earlier. The share of retail, alternative assets (hotels, student housing, care homes etc) and industrial properties is declining, accounting for 17% and 6% and 5% respectively.

Strong competition for the best assets is putting further downward pressure on yields. The prime office CBD yield moved by 25 basis points over the quarter and currently stands at 3.5% - exactly the same as in Q3 2007.

'As values reach pre-crisis levels, it may be a trigger for owners to consider selling and the wave of very large properties acquired in 2007 may slowly come back to the market, said Lydia Brissy, director of European research. 'Commercial property remains an asset class of potential high return compared to other assets, albeit the prime yield reached its record low. And despite the recent rise in interest rates, financial conditions remain favourable.'

Boris Capelle, head of investment at Savills France, added that the recent big-ticket transactions completed by international investors signalled an upswing. 'We believe this trend will further accelerate in the coming months. We anticipate the investment volume to reach €22 bn at year-end. The last quarter, which always sees the most activity in France, could witness a record €9 bn worth of investment activity.'