France in 2022 ‘a defensive play comparable to Germany’
Although France experienced deep recession in 2020, owing to the health crisis which slashed GDP by 8%, 2021 saw GDP bounce back by 5 to 6%.
“Economics-wise, we believe the crisis has been quite well managed in terms of compensation for companies and today we’ve got falling unemployment rates and there have never been less defaults among companies and therefore tenants,” said Primonial’s director of research and strategy Daniel While.
In 2022, France could further benefit from its low-risk status which While says makes it a defensive play comparable with Germany.
“Sometimes people are surprised by the fact that our [default] rates are so low and quite close to Germany’s, for example, which has a reputation of being a better run country.”
He puts this solidity down to France’s “structural political stability”: in a French election a majority of more than 50% is needed to win, he pointed out. “That’s quite a guarantee of political stability,” While told Real Asset Insight’s Richard Betts.
Tax collection system sets France ahead of southern Europe
The country also benefits from an efficient tax collection infrastructure which sets it apart from the countries of southern Europe, he added.
In 2022, he said office market investors in France are likely to make a flight to quality and to inner Paris, where the vacancy rate is only 3% and there is scope for rents to rise. Cap rates for prime Parisian offices are currently 2.75%.
While added that a second trend in 2022 will be a further move to “decorrelated” alternatives such as residential, logistics and healthcare property.
However, he pointed out that such is the shift in the residential sector’s favour that it can hardly be called “alternative” any more. Three years ago annual residential investment volume was around €1 billion. Last year it hit €5 billion. “Clearly something is happening on the residential market,” While said.
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