Strong foreign activity in France boosts EUR 100 mln-plus deals

There has been a strong return of foreign buyers in the French investment market this year, particularly sovereign wealth funds from the Middle East. These investors, primarily Qatari buyers interested in trophy assets, have boosted the number of deals exceeding EUR 100 mln in France to 31 in the first nine months of the years compared to 21 in the same period in 2011, according to International real estate advisor Savills.

During the first three quarters of 2012, overseas money made up 40% of total investment in France, compared with 30% in the same period in 2011. Aside from Middle Eastern investors, Savills’ research shows an increase in investment levels from Chinese, Dutch, Swedish and Swiss buyers. German investors have withdrawn, accounting for approximately 4% of the investment share in Q1-Q3 2012, down from 8.5% in the same quarters in 2011.

Boris Cappelle, investment director at Savills France, said: ‘There has been a clear shift in the international buyers’ profile in France with Middle Eastern, especially Qatari funds, accounting for almost 15% of investment activity so far this year. However, the market does remain sensitive to wider Eurozone uncertainties and domestic investors still dominate the market. We believe total 2012 investment volume for France will exceed the EUR 13 bn mark, compared to EUR 15.8 bn in 2011.’

This increased level of activity from Middle Eastern investors has marked a return to deals of EUR 500 mln and above for the first time in five years. Such deals include the purchase of 50-52 Champs Elysées for EUR 500 mln by Qatar Investment Authority and the acquisition of four hotels (Martinez, Hôtel du Louvre, Concorde Lafayette and Palais de la Méditerranée) by Katara Hospitality for EUR 750 mln.

Core investments remain the most sought-after assets in France, according to Savills, with the office sector continuing to dominate followed by retail. In terms of yields, the firm’s data records prime office and high-street retail yields as low and stable at 4.5% in Q3 2012 and expects these to stay at this level to year-end.