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PropertyEU France Investment Briefing: Video and top take-aways

PropertyEU

Thibault Ancely (Head of France, Directeur Général) participated in PropertyEU’s France Investment Briefing panel on 22 April 2015. Watch Thibault's highlights from the conference, and read his top take-aways.

Video: Performance within the Paris office sector

Video: The positivie impact of the Grand Paris initiative

There were 70 attendees from across Europe. Thibault was joined on the panel by Nicolas Verdillon (Executive Director, Capital Markets, CBRE, France), Bertrand Courtois-Suffit (Owner, Mall & Partners, Belgium) and Francois Rispe (MD, Regional Head Southern Europe, Prologis, France). 

  • There was a 2.2 million sq m take-up across the Île-de-France during 2014; a significant increase since 2013. There has, however, been slow take-up during Q1 2015 (372,500 sq m vs 508,900 sq m in Q1 2014) which appears due to tenant lease renewals and a lack of high quality stock.
  • The average vacancy rate across Île-de-France is 7.2%. Some areas in Paris have high vacancy rates, due to old buildings and rental values being a bit high, although rents are stabilising.
  • 2014 saw a 40% increase in investment volumes, compared to 2013. There has been a 10% increase year-on-year Q1 2014 vs Q1 2015, with €4.3bn invested during Q1 2015. Deal sizes are much larger, with 49% of investments more than €200m, and 76.7% of investment being in the office sector. The majority of equity is from domestic investors followed by the US and Middle East. Paris CBD continues to be the prime focus for investment across France
  • Logistics is increasingly popular, with a 44% rise in take-up Q1 2014 vs Q1 2015. International investors, particularly from Asia, have been targeting the sector. E-commerce players are trying to find the best logistics model to support quick delivery of their products to consumers, which is resulting in increased interest in small warehouses near the main metropolitan cities.
  • Retail sales have been slightly decreasing, which has meant that it’s been difficult for landlords to renew leases and fill vacancies. Large shopping centres are most attractive, as well as high street prime locations. Several new shopping centres are due to open this year, although these are developments which started 10-15 years ago before the GFC. The market is now more orientated to refurbishment and extension development projects. Jumbo malls do not frequently come to the market, but when they do, it is usually local investors rather than international, due to their local knowledge and in-house skills to transact on these deals more efficiently.
  • The threat from e-commerce has dissipated, as retailers have realised the value of a physical store to support their e-commerce strategy in marketing their products and providing click and collect services. Interestingly, 15% of retail take-up during 2014 has been by e-commerce retailers. It’s expected that this will increase to 25% during 2015.
  • Rents are stabilising across the office sector, with investors now targeting locations outside of Paris, and in regions such as Lyon.
  • If given €500m, where should you invest? Core office locations within Paris city should be targeted, where one can take a risk on tenancy schedule, as there are very few quality buildings. For those that can take on more risk, La Défense is a very good location, as it has a strong letting market and is one of the best transportation hubs in Europe. It will also benefit from the Grand Paris developments. 

Disclaimer
Issued by Henderson Real Estate Asset Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. TH Real Estate is a name under which Henderson Real Estate Asset Management Limited provides investment products and services. Past performance is not a guide to future returns. The value of investments and any income will fluctuate (this may be partly be the result of exchange rate fluctuation) and investors may not get back the full amount invested. Where opinions have been expressed, they are based on current market conditions and are subject to change without notice