Paris Property Investment Update
The springtime election this year of President Emmanuel Macron has brought a new era of confidence to the French economy. Referred to on occasion as the ‘Macron effect’ his election has boosted the overall French economy and in particular the real estate sector. At an October PropertyEU France Investment conference at the London offices of Taylor Wessing the mood was upbeat with European real estate analyst for Schroder RE Oliver Kummerfeldt stating:
'It is a very exciting time for France and in particular for Paris,'
'The economic momentum is making the market attractive and it offers many opportunities for investors. Macron’s election has provided stability and sentiment is high.'
A revised figure for this years GDP has been raised to from a predicted +1.3% to +1.7% for 2017 and 2018. A favourable employment environment and reforms have helped bring confidence across the French market.
Commercial Space Increase
Office space has become a hot market as a result of firms increasing their employment needs and other additional space for expansion. As a result of demand construction has increased but the fear of an oversupply is not expected.
As a result Mr. Kummerfeldt said:
'Office take-up in Greater Paris is up. Occupiers have released the brakes and are actively looking for space or taking up additional space, so office vacancies have started to decrease.'
Also commenting was Raphael Tréguier, CEO of CeGeREAL :
‘Take-up of office space has been increasing for the last five years, but nevertheless the Macron effect is real.There is positive momentum, with more investments creating more employment, which in turn generates the need for more office space.’
One expectation for new office space is that it must meet requirements for being green along with good connectivity.
Guillaume Turcas, a property expert states:
‘You have to be green: it is part of the market mindset now.’
‘When corporates choose an office, of course location is important but sustainability is also top of the list. We have been letting our buildings quicker, so sustainability has been a good bet from a purely financial point of view. Being green was an objective, now it is normal.’
Schroder RE reports in its research that areas vary in vacancy rates from 2% in the Central Business District increase to 15% depending in other areas of the Paris.
This summer it was announced that Paris will host the 2024 Olympic games which has certainly increased the economic optimism for the property and infrastructure market sectors. This should also bring new foreign investment as projects including the Grand Paris infrastructure plans to increase the transportation links for the outside Paris suburbs.
Arnaud Violette, general manager, business development, Colliers International told PropertyEU:
‘Twelve kilometres of new metro lines will create opportunities all around Paris for investors and occupiers.’
Also commenting Mr. Kummerfeldt :
‘The Olympic Games will not only be a marketing opportunity for what is already Europe’s most visited city, but will create ‘new permanent structures and projects which I am confident will be delivered on time,’
Ludovic Bernard, partner at Internos Global Investors:
‘International investors are looking at France again, the country is back on their radar screens,’’
‘Macron is sending the right signals and saying the right things, welcoming investors and capital. The other positive factor is demographics: unlike its neighbours France’s population is increasing. Plus the economy is growing. The combination of these positive factors means that if you don’t invest in France today, then you probably never will.'
Cash flow from investors are mostly domestic near 2/3 of the total, German investors are second at 10% with the rest being from the United States, Asia and Middle East.
Raphael Tréguier, CEO of CeGeREAL
’'There are a lot of Asian investors investing in France through asset managers, often under the radar, so it can be difficult to know exactly who is investing. But it is a fact that some Asian investors know the French market very well.’
One advantage benefitting investors is the financing market, Serge Bacconnier, deputy head, Paris office, Berlin Hyp:
‘Interest rates are low and will stay low, and banks have a lot of money to lend and are ready and willing to finance property deals, including development and big-ticket transactions, The positive financial and economic environment is enhanced by political stability and the new president’s promise of reforms and welcoming attitude to investors.’
On Macrons success of attracting investment to France Alfred Fink, partner, Taylor Wessing says:
It is mind-boggling how much he has achieved in just five months, like the reforms of the labour laws which were unthinkable until recently. There are concerns about a future property tax in 2018, but I believe it will be balanced out and in any case it will only apply to private and not to institutional investors.'