Luxury retail and hospitality back in vogue in France

Retail and hospitality are making a comeback in the French market, experts agreed at Real Asset Media’s France Investment briefing, which took place recently in London.

(L to R) Guillaume Turcas, Faro Capital Partner; Serge Bacconnier, Berlin Hyp; Gwendal Kalkofen, Europa [Image: Karla Gowlett].

“We look favourably at the fundamentals of retail after a very challenging time for the last few years,” said Gwendal Kalkofen, managing director, head of real estate finance, Europa. “There’s certainly resilience in the high-end retail market, which is very attractive. The debt market, which had reduced its exposure, is now going back in.”

The so-called Golden Triangle, the luxury quarter in the heart of Paris, has seen no crisis. Prices continue to rise and transactions are happening, driven by domestic as well as foreign investors.

“The luxury houses are buying up everything they can and they basically own the city,” said Guillaume Turcas, managing partner, Faro Capital Partners. “The prices of high-end resi, high-end hospitality and high-end retail are going through the roof, which is something we hadn’t seen for quite a few years.”

In the last few months Kering, the French luxury giant, has bought the former Canadian Embassy on Avenue Montaigne for €860 million. It also acquired, in an off-market transaction, an 8,000 sq m mixed-use development on the corner of Rue de Castiglione and Rue Saint-Honoré for over €600 million. Once completed, 80% of the retail, office and residential project will be occupied by Gucci, a Kering brand.

“The luxury market has picked up very quickly after the pandemic,” said Alfred Fink, partner, head of real estate, TaylorWessing. “There is a lot of activity at the high end, especially in hospitality. Middle Eastern and Asian investors are actively looking and they still see Paris prices as a relative bargain.”

Despite the sluggish transaction market in the first few months of the year there have been several hotel sales. Dubai Holding, for example, acquired the Westin Paris Vendome hotel for €650 million.

“Business hotels are also picking up,” said Fink. “People are back on the road to have personal contact and face to face meetings. We expect a lot of development in these two sectors in the next few months.”

Operational real estate in general is attracting a lot of interest, he said: “It involves taking on operational risk, but now that values are going down and people are becoming more realistic deals are happening. Owners are having more of a say in the operational side.”

The interest in operational real estate extends to senior living, which is attractive because of structural demographic tailwinds.

“Senior housing all over France is doing well, but like all resi sectors it has problems in getting permits,” said Turcas.

The next big trend in the sector will be shared accommodation, said Fink: “Co-living for seniors is growing, and we think it will move very fast in the next couple of years.”