France Commercial Real Estate Emerges From Two Year Slump

Led by demand for prime Paris office locations, commercial real estate in France is emerging from a two year slump after a promising first half of 2010. Motivated …

Led by demand for prime Paris office locations, commercial real estate in France is emerging from a two year slump after a promising first half of 2010. Motivated by eroded prices, competition among investors contributed to a strong performance in the office sector, where rents add to profitability. See the following article from Property Wire for more on this.

Commercial property values in France increased in the first six months of the year, ending a two year decline as investors competed to buy the best office buildings, the latest research shows.

Properties ranging from apartment blocks to shops increased 1.6% in the period, according to the London based Investment Property Databank index. On a year on year basis values fell 0.4% after a drop in the second half of 2009, IPD said.

Overall commercial values in France fell 18% in the past two years after the financial crisis caused investment demand to collapse and companies became reluctant to expand, stifling rental growth. The price slide persuaded investors such as German insurer Allianz SE to acquire prime buildings, targeting Paris offices in particular.

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‘French property has finally turned the corner. Since the middle of 2009 we have seen quite a lot of cash rich investors seeking to buy prime stock, that is properties in prime locations, with financially strong tenants on longer leases,’ said Christian de Kerangal, IPD’s managing director for southern Europe.

Allianz agreed in May to acquire part of the Capital 8 office complex. The property includes three buildings near Paris’s Parc Monceau that are fully leased to investment bank Rothschild & Compagnie and corporate finance adviser Aforge.

Paris’s central business district had the biggest gains in the period at 2.8%, followed by La Defense on the city’s western fringe. The Paris region is Europe’s largest office market by size, making it the favorite location for international investors after London.

Across France, office values gained the most, with a 2.4% rise that was double the rate for shops and mixed use buildings. Warehouses and industrial sites depreciated by 1.4% in the period.

If rental income is added, owners of French commercial properties made a profit of 4.7% on their investment in the six months. The gains multiply if debt is included.

IPD compiled its semi-annual index using appraisals of 1,480 properties across France worth an estimated €33.9 billion.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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