France real estate: Distress will create opportunities for investors

Distress will create opportunities for investors, experts agreed at Real Asset Media’s European Outlook: France Investment Briefing, which took place online recently.

‘When lockdown started, everything went downhill,’ said Nicola Ciavarella, Director of Investment, France, Savills. ‘Residential and logistics recovered very quickly, offices are in the middle, depending on the risk/reward curve, but retail and hospitality are still suffering’.

The hospitality sector, the most penalised by Covid-19, is unlikely to recover quickly even if restrictive measures have been lifted. The expectation is that the sector will be hit again by the economic slowdown, high unemployment and low consumer confidence.

‘A lot of distress is coming, without a doubt,’ said Guillaume Turcas, Managing Partner, Faro Capital.‘Opportunities too: with US and Asian travellers missing hotels are going through a very bad time but in 12 to 18 months tourist will be back. A well-located hotel now facing problems would be a very good choice. My advice would be to cherry pick’.

The same case can be made for high-street retail in France’s top cities, hit by lockdown and by the absence of big-spending tourists.

‘High street retailers, restaurant chains and small hotel chains are in a very difficult situation after the lockdown,’ said Alfred Fink, Partner, TaylorWessing.‘There are 200 shops for sale and also big portfolios are coming to the market and they are attracting a lot of interest’.

The office sector is still seeing demand, but it is more muted. ‘In the Paris CBD the situation is pretty good, but before you’d have a choice of ten tenants for every asset, now you are talking to one or two,’ said Turcas.

Investors that are still active in the market are willing to go out of their comfort zone.

‘We see core investors looking at suburban locations,’ said Turcas. ‘The only positive thing to come out of the crisis is that risk is getting a reward again and the strategy you choose really makes a difference’.

Given the level of uncertainty over coronavirus and the economy, it is a market for patient rather than opportunistic investors.

‘It is back to fundamentals in real estate,’ said Fink. ‘You need to create value, not just get cheap financing and flip the asset quickly. Investors are adopting more medium or long-term strategies’.