C&W: Commercial property in France; €2.6 billion invested in the first quarter of 2013 (FR)

After a fairly active fourth quarter 2012, the €2.6 billion invested in France in the first quarter of 2013 represented a slight increase on Q1 2011 (€2.5 billion), but is still far behind the average quarterly figure of the last 10 years (€3.4 billion).

“Seven investments over €100 million accounted for 45% of all investments made in 2013”, said Olivier Gérard, President of Cushman & Wakefield France. A further 12 acquisitions in the €50 to €100 million range, compared with just one such transaction in Q1 2012, also played a key role. There were, however, fewer deals in Q1 2013 than in Q1 2012 (57 vs 87 the previous year).

Geographical breakdown

€1.9 million were invested in Ile de France in Q1 2013, almost 50% up on Q1 2012, representing 74% of all investments in France. The majority of investments in Ile de France were made in offices (67%), but the sale of flagship retail outlets or trophy buildings on the major high streets of the capital (e.g. 8 Place Vendôme, acquired by the SOFAZ and 118 Avenue des Champs-Élysées sold to Pramerica) also constituted a significant share of investments. Large office building sales included Mirabeau tower in Paris’ 15th district, confirming Paris Intra Muros, which accounted for 43% of commitments in Q1 2013, as a highly sought-after investment location. €680 million were invested in the provinces in Q1 2013, up by 33% yoy. Most provincial investments were made in out of town retail parks, including a portfolio of shopping arcades and retail parks sold by Immochan to CNP for €160 million. Indeed, there was a strong increase in investments in retail property in the provinces (76% in Q1 2013 vs 27% in Q1 2012), whilst less investments were made in offices (48% in Q1 2012 vs 7% in Q1 2013). Finally, several sales of logistics platforms translated into an increase in industrial investments in the provinces to stand at 17%.

Office investments

Offices, which on average make up for three quarters of investments in France, only represented 51% of investments in Q1 2013, or €1.3 billion. The slowdown which started in 2012, continued into 2013. This can mainly be attributed to the limited number of large or very large transactions (only 3 office buildings were sold for over €100 million in Q1 2013). The office share should, however, pick up again in the next few quarters, as several large-scale investments are set to go through (e.g. the Ivanhoe Cambridge portfolio) and other large office schemes located in established business districts such as Paris Intra Muros, La Défense and the WBD are scheduled to be put on the market. The same is true of the provinces, which were marked by very few significant office transactions in Q1 2013.

Retail investments

The most significant change in the first quarter of 2013 was the increase in retail transactions. Accounting for €1.1 billion, retail property represented 42% of investments in real estate in France, compared to an average of 17% over the last decade. From 2012, several property companies have sought to refocus their portfolios on office assets, selling off other property types. The retail sector thus benefitted from the sale of several portfolios of shopping arcades in 2013. The first three months of the year also confirmed investor appetite for ground floor shops and mixed-use assets located on the busiest streets of France (118 and 76 Avenue des Champs-Élysées) or in luxury markets (8 Place Vendôme, 6 Rue de la Paix).

Industrial investments

A total of €190 million was invested in industrial real-estate in the first quarter of 2013, similar to levels recorded in the first quarter of 2012 (+3%), making up for 7% of all commercial property investments in France. Activity in the 1st quarter of the year remained limited, but was animated by the sale of several single assets, which were more considerable in size than those sold in Q1 2012. As was the case last year, activity is likely to pick up over the next few months with the sale of logistics portfolios, growing interest from unspecialized investors, and sustained interest from pure-players.


French investors accounted for 68% of transactions in France in the 1st quarter of the year. They were mainly comprised of insurance companies (CNP), OPCIs/SCPIs (Amundi, Primonial Reim) and property companies (Gecina). Foreign investors therefore made up for 32% of investments in France, a relatively significant share and a sign of their continued interest in the French market. Investors based overseas mainly carried out large transactions and accounted for three acquisitions over €100 million: Blackstone acquired the Crédit Agricole CIB headquarters in La Défense, Sofaz bought 8 Place Vendôme in Paris and Pramercia purchased the 118 Champs Elysées property. These transactions have also confirmed interest from newcomers to the French market (Sofaz) and the return of opportunistic investors (Blackstone). Both French and international investors have made the most of opportunities provided by vendors who are required to sell off assets to reduce debt (Crédit Agricole, Risanamento, etc.) or sales organized by major property companies who deal in all asset types (Klépierre, Icade, etc.).

Prime yields

Demand for securely let real-estate assets has kept yields near to their all time low point. Prime yields currently stand at under 5% for the best office buildings in the Paris CBD or prime high street retail. Logistics yields stand at 7.25 % for the best assets. The fact that prime property is still so expensive has encouraged some investors to widen their search criteria past the core segment to cover new or recently constructed buildings in secondary markets or redevelopment opportunities in established business districts.


While France might avoid recession, growth will come to a standstill in 2013 (+0.1%, forecast) and is not expected to pick up significantly in 2014 either (+0.8%, forecast). This will lead to further job losses and reductions in consumer and company spending. However, unlike the general deterioration in the economy, the commercial property investment market appears somewhat resistant. “The amount of capital available, the diversification of equity rich institutional investors and renewed interest amongst opportunistic investors may allow for increased investment activity in 2013. On the other hand, investor aversion to risk, the weak lettings market, instability amongst European banks, recently seen in Cyprus, and the uncertainty surrounding tax changes in France, will all continue to curb investments”, concluded Olivier Gérard.

Source: Cushman & Wakefield

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