Henderson Global Investors believes that investment the French property market is once again looking attractive and is exploring opportunities to recommence investment. Henderson will focus its attention on prime Parisian offices and France wide prime retail assets, both of which it believes are beginning to offer real value, having fallen 30 to 40% since the market peak in the summer of 2007.
For prime Paris offices, Henderson is forecasting that in the second half of 2009, net initial yields will stabilize between 6 and 6.5%, unless there is some significant and unexpected deterioration in the current economic conditions.
"After London, Paris stands out as the next best core European market to offer good opportunities," said Andy Schofield, Research Manager at Henderson Global Investors. "Should the current economic outlook remain unchanged, we would expect yields to stabilise at between 6.0 to 6.5%. However, these yields are only likely to be achieved for assets in prime locations and those with secure tenants on long leases let at current market rents. Such properties constitute only a small part of the market and, with a limited number of investors currently focussed on this segment, we anticipate that yields on these assets will eventually shift inwards. However, we expect this trend will contrast with that of the majority of other secondary assets which fail to meet these criteria".
Henderson also views the French retail market positively. It has previously been very difficult to penetrate for foreign investors and is seen as very defensive, being characterised by low volatility, stable long term income and an excellent risk profile. Tenants have good rent to turnover affordability and vacancy rates are low to non-existent for the best centers. "International investors have placed French retail at the top of their shopping lists for some years. Low competition due to strict urban planning restrictions and France's better-placed consumer finances being the main attractions for investors," says Chris Linney, Head of Property Investment France at Henderson Global Investors. "However, the market has tended to be dominated by domestic investors, with foreign investors finding it difficult to penetrate. The recent credit crisis has, to some extent, opened the doors to a wider investor constituency with domestic investors proving more willing to dispose of properties in order to meet their liquidity and capital requirements."
A major reason of Henderson's positive assessment of the French market is the relative resilience of its economy during the financial crisis. Its medium term outlook should be characterised by resilient domestic demand as a result of lower levels of household debt. In addition, France has a lower dependence on exports compared with other core countries such as Germany and the Government has provided prompt support for the economy via various economic stimulus packages.
"Along with London, which is where Henderson's initial focus has been when it has been examining potential recovery plays, France, and particularly Paris, is now firmly on the radar for buying opportunities and we would consider launching new products specific to these sectors given our current forecasts." adds Schofield.
Source: FD / Henderson
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