Investment volumes into France have reached record levels in 2019, driven by Asian and in particular South Korean capital, and prospects look good for 2020, delegates heard at Real Asset Media’s European Outlook 2020: Europe & France briefing, which was held in Paris recently.
‘This will be a record year for France,’ Larry Young, Head of International Investment Group, BNP Paribas Real Estate, told Real Asset Insight. ‘The final figure should be €35 bln, up 1 bln from the 2018 figure, as Q4 is proving to be very strong’.
Asian investors, especially from Singapore and South Korea, have been very active in Europe. South Koreans invested €13 bln this year, 5.5 bln of which in France.
‘France is the favourite destination in Europe for Asia-Pacific investors, who this year accounted for 41% of all inflows, compared to 16% in the UK and 10% in Germany’, he said. ‘Domestic investors usually dominate in France, but this year they have had to take a back seat’.
The office market is by far the strongest in France, accounting for 60/70% of the total and increasing by 25% thanks to some very big deals such as the €1.1 bln Lumière building in Paris, bought by South Koreans.
Paris offices is the first target for most foreign investors, Young said: ‘There has been a lot of cross-border activity in French offices, with over €15 bln of transactions executed. There has been a real spread of capital looking at Paris offices that hadn’t really looked at France before’.
The reasons are that the economy has picked up, many tenants are coming in and the Brexit effect is increasing demand for office space in the French capital. Not surprisingly, vacancy rates are at record lows and in the Paris CBD they are now below 2%. Office prime yields follow the European trend and are extremely low, down at 3% in Central Paris.
France’s success this year is not a flash in the pan but it is likely to be repeated in 2020, according to Young.
‘Looking ahead, we think France has a more compelling outlook regarding capital values over the next year,’ he said. ‘We expect a growth rate of 1% in London and 4% in Berlin, but our forecast for Paris CBD is +6.1% and for La Defense it is 6.6%’.
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