Cautious overseas money while French investors increase hold

Foreign investors are taking a wait-and-see attitude during this period of uncertainty, delegates heard at Real Asset Media’s European Outlook: France Investment Briefing, which took place online recently.

This leaves the field open to domestic investors, who have been increasing their hold on the market.  

Photo by Paul Fiedler on Unsplash

‘In H1 the share of domestic investment has increased to 64% from 47% in the same period last year,’ said Cyril Robert, Head of Research, France, Savills. ‘It is a big trend we have seen growing in the last few months as foreign investors have retreated’.

The retreat has been across the board. German investors, who were second with a 19% share of the market, now have 9%, while the UK has more than halved its presence from 7% to 3%. North American capital has gone from a 15% to a 5% share.

‘There were a few big transactions that have been put on hold during the lockdown and many investors are postponing the final sign-off to next year,’ said Alfred Fink, Partner, TaylorWessing.

Prices have held up so there have been no firesales to tempt reluctant investors. ‘There has been no price compression due to Covid-19 in inner Paris, although the situation may be different in the outskirts and suburbs,’ said Fink.

The prospect of a major economic crisis ahead is also dampening enthusiasm. The forecast is of a 10% fall in GDP this year and for the unemployment rate to reach an unprecedented 11%.

‘We’ll see less large investment transactions for a while’, said Benjamin Cartier-Bresson, Head of Paris Office, Berlin Hyp. ‘When the situation stabilises the French market will benefit from its strong fundamentals, such as transparency and liquidity, but that’s an advantage that will only kick in when we get to the new normal’.

It may take quite a while to get to the ‘new normal’. According to a snap poll conducted by Real Asset Media among delegates, a clear majority (59%) believes that investment volumes will only return to pre-crisis levels in December 2021 or later, while 28% think it will happen by June 2021 and only 13% see a return to business as usual by December 2020.

‘It will be hard to get back to normal and it will take time,’ said Guillaume Turcas, Managing Partner, Faro Capital. ‘I am pessimistic over the short term but definitely optimistic over the long term’.

Missed Real Asset Media’s European Outlook: France Investment Briefing? To catch up click on the video below.