French commercial real estate investment slipped last year by 3% from 2016 to €26.1bn, but was still nearly 40% above the 10-year average and should hold steady this year, says adviser Cushman & Wakefield. Domestic OPCI and SCPI funds were the 'stars' of 2017.
"Despite the election of the first half, investment volumes reached last year, without question reflect the economic upturn started at the end of 2016, and investor confidence in the fundamentals of the French real estate market," said Nils Vinck, C&W Head of Capital Markets France, in a report.
A number of significant changes occurred in the pattern of allocations last year. While office remained by far the most sought after asset type, e-commerce boosted the popularity of industrial real estate by 14%, putting volume almost on an equal basis with retail, a sector undergoing profound change - "with profitability nowadays difficult to understand," C&W said.
In the Paris Ile-de-France region, compression of premium office yields and lack of supply pushed investors to seek more profitable opportunities further out of the centre. They increased acquisitions in the huge La Défense office development on the western side of the French capital - 20% of total volume - and in the so-called western crescent (28%) beyond that, to the detriment of Paris city itself, broadly defined as the area within the Peripherique ring road.
In the fourth quarter of 2017 transactions of more than €200m increased to no fewer than nine deals for a total volume of €5.3bn. The largest was the sale of the massive Cœur Défense office block, the 'heart' of La Défense, acquired by the joint venture ACM, Amundi Immobilier and Primonial REIM in the largest single asset transaction of the year. La Défense also proved attractive to fund managers who acquired the Hekla tower and buildings Palatine II and III.
Magali Marton, C&W head of research, France, commented: "With acquisition volume up by 48% to nearly €9bn, SCPIs and OPCIs were the stars of 2017 and, for the first time in their history, took pole position in the ranking of the most active investors." On the other hand, and for the second consecutive year, investment by insurance groups stagnated. These reached only €2.3bn in direct allocations, down 53% from 2016.
Looking ahead, Vinck said the stable economy is likely to keep investment strong this year. "The buzz observed on the rental market for offices in Ile-de-France, coupled with the optimism of French economic forecasts, opens up excellent investment prospects for 2018, estimated at between €26bn and €28bn." But he added: "We have probably reached a low point in terms of prime yields which are likely to remain stable in 2018."