The prospects for France's commercial real estate sector are improving going into Q114 as the economy slowly starts to find its way back to growth. Direct investment in the property market grew significantly on a year-on-year (y-o-y) basis in Q313, reflecting growing international recognition of the market as a safe-haven amid continued uncertainty surrounding the global economic outlook. In Q114, we are forecasting rental rates to remain stable across the three sectors we cover of office, retail and industrial. Yields are also expected to remain fixed at currently levels, reflecting a relatively balanced supply-demand dynamic across the market.
With a focus on the country's principal cities of Paris, Marseille and Nice, the Q114 France Real Estate report covers rental market performance in terms of rates and yields across the commercial office, retail and industrial sectors. We expect the most positive impact to be seen across the retail sub-sector, which will benefit from a continued improvement in consumer spending and robust tourist numbers. France is also benefiting from improving external demand, with export growth of 5% forecast for 2014 and expected to drive growth in the industrial real estate market over the year as a whole.
- UK developer Hammerson has announced that it is planning to expand its retail property investments in France. The firm is planning to acquire new retail assets, including a shopping mall near the Eiffel Tower in Paris, as well as extend some of its existing shopping centres in the country.
- European financial services group Catella has announced plans to set up a property asset management business in France in early 2014. The business will be led by Francois Brisset, former managing director and co-founder of DTZ Asset Management, and will focus on investment, asset and property management on behalf of investors from France and other countries.
- Property company Primonial REIM has bought an office complex in France from AXA Real Estate for EUR46.7mn (US$64.23mn). The Alpha office complex has a gross lettable area of 7,638 square metres and is fully leased on a nine-year contract.
- US-based real estate services firm Cushman & Wakefield has said the cost of retail space along Avenue des Champs Elysees in Paris is on the rise. According to the company, the improving fortunes of the district have been driven largely by international tourism. It was noted that annual rents along Champs Elysees, which connects Arc de Triomphe with Place de la Concorde, are currently averaging US$17,770 per square metre.
Key BMI Forecasts
- Rental rates are forecast to remain stable across each of the office, retail and industrial real estate segments during the October 2013- March 2014 period. Rents will remain fixed at current levels at both the minimum and maximum end of the market.
- Rental rates in the retail sector will continue to outperform the rest of the market in terms of price. Maximum rents in Paris are forecast to remain fixed at US$367.50 per m/2 per month while those in Marseille and Nice are set to stay at US$217.50 and US$207.50 per m/2 over October 2013 - March 2014.
- The industrial sector will continue to see the highest net yields of the three real estate segments with yields forecast to remain stable at 7-12%; 7-9% and 5-12% in Paris, Marseille and Nice, respectively.