Paris becomes the top European market for foreign investors

Paris was the top market targeted by international investors as a percentage of total flows, ahead of London for the first time and came just behind New York in terms of foreign capital invested.

French investment was underpinned by an abundance of global liquidity, combined with a resilient domestic economy, with relatively low vacancy rates and rising rents. BNP Paribas says the coming years should see an average of €35 billion in annual transaction volumes.

Olivier Ambrosiali, Deputy Head of the Sales and Investment division for BNP Paribas Real Estate Transaction France, said: “We are also likely to see further yield compression for all assets.”

Offices remained very comfortably in the majority in France and attracted a record €25 billion investment over 2019. With the overall total up 8% over one year, investment in the Ile-de-France office market was almost €22 billion. There were more off-plan sales in the regions than in 2018 at over €1.2 billion, i.e. over 40% of the market. Lille, Lyon and Bordeaux were first, second and third respectively in terms of off-plan sales and in 2019 cities like Nantes, Strasbourg, Toulouse, Rennes and Montpellier also shared this flourishing market.

Capital values are rising sharply with a very strong scissor effect: falling interest rates and rising rents, prompting investors to increasingly take a value approach according to the efficiency and quality of the unit. In Île-de-France, major deals for over €100 million accounted for 70% of overall investment across a total of 57 transactions in 2019.

Investment in Retail premises in France came in second at €6.2 billion. This market is thriving with growth of 38% vs. 2018. This record increase stems from a particularly buoyant fourth quarter. All types of retail premises combined now account for 15% of investment in commercial real estate in France. It is still the high street transactions that are really driving this market, with € 3bn invested. Inner-city shopping centres and food store premises also contributed to these near-record levels of investment.

Logistics has performed better than ever in terms of both amounts invested and yields, with French investors making a comeback. A record was already set in 2018 with € 2.8bn invested. This almost doubled in 2019 to a total of € 5bn. This corresponds to almost 6 million m² sold, i.e. 50% more than in 2018. This amount was generated by around 50 investors across about 100 transactions (vs. just 65 in 2018).  Of these 100 transactions, there were 11 deals for over € 100m and a sharp increase in individual transactions: 72 in 2019 vs. 47 in 2018.

Investment in hotels rose dramatically, up to € 2.6bn in 2019 vs.€ 1.7bn in 2018. The hotel sector benefited from a very favourable events calendar, such as the Women’s World Cup, the 75th anniversary of the D-Day landings and the G7 in Biarritz.

james.wallace@realassetmedia.com