International investors return to the French market after lull

International investors are returning to the French market, delegates heard at Real Asset Media’s France Investment briefing, which took place yesterday at TaylorWessing’s London offices.

Alfred Fink, Partner, Head of real estate, TaylorWessing

“Institutional investors, especially from Asia, are coming back after a wait and see period,” said Alfred Fink, partner, ead of real estate, TaylorWessing. “Capital from South Korea is looking for large portfolios and seeking to avoid the mistakes they had made in the past.”

The repricing of assets is playing a big part. Last time around, South Korean investors had bought expensive assets at the peak of the market. “They then found they had to put in capex as well, which they had not planned on doing,” said Fink.

Middle Eastern and Israeli capital is also looking for opportunities in France, while UK investors are more hesitant, according to Fink.

“We’ve yet to see volumes return to normal, but in the last few weeks there has been a lot more optimism in the market as the hierarchy of pricing is changing,” said Guillaume Turcas, managing partner, Faro Capital Partners. “The equity’s there and assets are coming back to the market.”

In Q1 France overtook Germany to take second place behind the UK in the ranking of Europe’s top national investment markets, according to the latest MSCI Real Assets data. Yet investment volumes declined 40% in the first three months of the year to €6.9 billion, €5.3 billion of which was in Paris.

The difficult macroeconomic environment, with rising interest rates and high inflation, and uncertainty over valuations has led to a marked slowdown in the market.

“Transactions have dropped and we’ve seen a standstill period,” said Serge Bacconnier, deputy head Paris office, Berlin Hyp.”We’re keeping very close to our clients in managing the transition period when financing reaches maturity, as they don’t want to sell their assets because of the repricing going on, so they want extensions.”

International investors have recognised that while they have the capital they need people on the ground with local knowledge, so it is useful to have a French partner, such as Amundi for the Koreans.

In order to encourage the current positive trend of investors returning to the French market, TaylorWessing has just published its Property Passport France, a step by step guide to investing in real estate in the country. “It is an introduction to how business is done in France,” said Fink. “The idea is to give practical information to investors and help them avoid mistakes that are easily made.”