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Knight Frank: investment activity in France stable in H1 with €11.6 billion

The total number of investment deals in France during H1 decreased by 15% year-on-year, but Knight Frank says this was offset by the volume of transactions above €100m – of which there were 28 (compared to 33 in the first half of 2018), reflecting 63% of all capital deployed in France during the period.

Two mega office deals stood out during H1 – the Texas portfolio undertaken by Swiss Life and the consortium acquisition of Lumiere building by Samung, Hanwha Investment and Primonial REIM – for an almost €3 billion combined.

These two large-scale transactions boosted the Greater Paris Region’s share of France’s national investment activity to €9.5 billion in H1. Indeed, the capital alone from these two mega deals accounts for 51% of total investments in France since the beginning of 2019, including a significant proportion in the Paris Centre West sector.

And this trend is set to continue, insists, Knight Frank, with other mega-deals will soon be finalised in the Paris region, such as the sales of the future NIKE flagship on the Champs-Elysées, “Majunga” in La Défense and “Crystal Park” in Neuilly-sur-Seine.

Overall, investment volumes in the French office market tripled between Q1 and Q2 and was up 10% year-on-year in H1 to €9.2 billion, which reflects 80% of all investments in France in the period.

Vincent Bollaert, Head of Investment at Knight Frank France, explains:

“While Paris was the star of the first half of the year, La Défense could well take over by the end of 2019. Several further major transactions will be completed, testifying to the confidence that foreign investors, particularly Koreans, have shown in the future of Europe’s leading business district.

“Elsewhere in the Greater Paris Region, the rest of the investment activity is split between Western areas that are located in proximity to La Défense (Neuilly-sur-Seine, Rueil-Malmaison, Nanterre, etc.) and other Inner Suburb markets such as the South.

“The latter remains very popular: continuing the very good results of H2 2018 (€715 million invested), €650 million invested in H1 2019, mainly concentrated in the towns of Montrouge, Châtillon and Malakoff.

“The Greater Paris Region office market remains very attractive to French and foreign investors, whether they are positioning themselves on core assets or favour greater risk exposure, encouraged by the strength of occupier demand and a controlled supply of offices.

“The dynamism of the Paris market obviously helps to reassure investors about the success of value-add deals and the growth potential of Market Rents. “Other sectors in the Greater Paris Region also present good opportunities, particularly those that provide a good alternative to Parisian occupiers, who are constrained by the shortage of supply and the increase in rents in the capital.”

Elsewhere, the region French office market reveals a different story. Approximately €610 million was invested in H1, a decrease of 26% compared to H1 2018 and by 75% compared to H2 2018, with the latter comparable period notably boosted by Gecina’s sale of two office portfolios for almost €800 million.

Knight Frank’s review of H1 2019 continues next week.

james.wallace@realassetmedia.com