The market in France has taken a hit with the coronavirus pandemic but it has bounced back from its lows, delegates heard at Real Asset Media’s Market Snapshot: Investing in France briefing, which was held online on REALX.Global.
“There was a sharp drop in Q2 but since May we’ve seen a marked rebound,” said Laurence Bouard, directrice etudes et recherche, Colliers International France. “The investment market has been less impacted than the leasing market.”
The market is moving in the right direction but it will be a steep climb back, she said: “GDP is not expected to return to its previous 2019 levels until 2022 and it’s still not clear what the impact of the Government’s €100 billion economic support plan will be. As we know, the real estate cycle is strictly correlated to economic growth”.
Office take up declined in first-half 2020
Office take-up in the Paris region declined by 40% year-on-year in H1, while Q3 figures that have just been released show a 36% decline. Total take-up in 2020 is expected to be 1.3 million sq m, compared to 2.4 million sq m in 2019, according to Colliers.
Investments were less badly hit, declining by 27% in the first nine months of the year. In Paris, investments reached €13 billion in the year to the end of September, while the regional cities performed better than the capital, with Lyon and Lille attracting the most interest.
‘Investors are mainly domestic now and they are being more selective, focusing on core products’, said Bouard.
At the start of the year there was a real sense of optimism in the market, as 2019 was a record year for foreign investments, which increased by 11% on the year before. The pandemic has changed all that, bringing domestic capital to the fore.
“Physical constraints and restrictions on travel mean that domestic investors are winning the day,” said Europa Capital partner Andy Watson, . “Foreign investors are on hold, including our parent company Mitsubishi. It’s been a real change from last year, when La Défense was full of Korean money.”
France still among top three investment destinations
Whatever the present difficulties, France remains in the top three in Europe after Germany and the UK and still has some of the highest prime rents and lowest yields, pointed out Bouard.
Foreign investors will be back, said Guillaume Turcas, managing partner, Faro Capital Partners: “Paris is and will continue to be a must-stop in Europe, along with Greater London and the top German cities.”