Despite investment transactions in France totalling €10 billion in Q4 2020, investment for the full year totalled €28.2bn which represented a 35% fall year on year, according to BNP Paribas Real Estate.
But although the figure was in stark contrast to several consecutive record years, it is nevertheless close to the long-term average of €28 billion.
The decline occurred among all asset categories the firm points out, but offices remain the most popular segment, attracting €18.6 billion over the full year. Logistics and industrial assets and offices have been the most resilient with a fall of around 30% according to Olivier Ambrosiali, deputy general manager of the firm’s sales and investment division. “Conversely, investment in service real estate has suffered badly in the current economic climate,” he said.
Cash-rich players such as life insurance companies, pension funds and unlisted investment vehicles (e.g. SCPI and OPCI) remained the most active investors. Notably, foreign, particularly Asian, investors were less active.
Nevertheless, investors were seeking risk-free assets at any price and prime yields for logistics and offices fell respectively to 3.90% and 2.70% by the year end. Only retail yields rose, by around 65 bps.
Île-de-France office lettings fell 45% in 2020
In terms of letting activity, Office take-up in the Île-de-France region, which includes Paris, fell 45% year-on-year in 2020. Just 1.3 million sq m was let which was also well below the 10-year average of 2.26 million sq m according to BNP PRE.
Éric Siesse, deputy general manager of the firm’s Île-de-France office letting division, said that the volume of large units over 5,000 sq m changing hands was historically low, despite two exceptional deals during the year: Petroleum giant Total took 130,000 sq m in La Défense and Engie took 83,000 sq m in La Garenne Colombes.
Siesse said there were only 21 deals over 5,000 sq m in the whole of the year. Meanwhile, there was also a significant 39% decline in lettings of small/medium-sized offices up to 5,000 sq m.
The firm said that all business sectors were very quickly affected by the health crisis, and real estate was no exception.
Vacancy rate rises but not uniformly
By the end of 2020 the Île-de-France office vacancy rate had risen sharply to 6.8%. The rise occurred in all districts, but some fared worse than others which BNP PRE said has created two distinct situations. On one hand, the vacancy rate in the Péri-Défense district was already very high so comes in at about 18 while the Paris CBD at 3.6% still has little availability and vacancy there is below its long-term average.
Following a surge last year, the supply of offices under construction has stabilised at 1.8 million sq m as at 1 January 2021.
Meanwhile, the logistics market in France “confirmed its solidity” according to head of logistics René Jeannenot.
Take-up of warehouses over 5,000 sq m was 3.6 million sq m, down just 7% year on year. About 2.1 million sq m was let in the second half, a 21% increase against the previous year.
“The current conditions, with the ongoing reorganisation of the supply chain among industrial and retail players, the rise of e-commerce and investors’ confidence in this asset category make us highly confident for 2021,” Jeannenot said.