Shopping centers and German investors are driving recovery in French commercial real estate, with transaction volumes for 2010 so far already approaching the total for all of 2009. Viewed as a safe asset, retail is catching up with office investment in terms of market share, but cautious consumers and excess supply pose a risk for the sector. See the following article at Property Wire for more on this.
French commercial real estate investment market has seen a 41% increase with €6.9 billion transacted in the first nine months of the year, according to a new report.
It has gained in momentum since its low point in 2009 when the total annual investment volume did not exceed €7.8 billion, the report from Cushman & Wakefield shows.
While offices are still the predominant asset type, they have lost market share. With €3.9 billion transacted since the beginning of the year, offices only accounted for 58% of market share compared with 67% in 2009. Retail assets now have the advantage, thanks to a wider range of potential buyers, greater available supply and yields having stabilized. Retail property continues to perform well, consolidating its increasing market share.
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With a total of €2.4 billion invested so far this year, retail investments have increased more than any other and were up by 86% at the end of the third quarter compared with the same period in 2009.
Recognized as being a particularly safe option, retail assets continue to attract risk averse investors looking for secure investments. Retail accounted for a record breaking high of 35% of all property investments in France in the first nine months of 2010. Furthermore, retail continues to gain market share, some 35% in 2010, compared with 24% in 2009 and an average of 10% between 1999 and 2008. This trend is even more marked in the provinces where retail accounts for 66% of all property investments.
The report suggests that there is a strong increase in investment volumes due to the success of shopping centers. ‘The fact that investors are looking for low risk, securely let assets along with the increase in the supply of shopping centers, has meant that the share of shopping center investments in relation to all property investments has gone up considerably,’ the report says.
Due to higher supply, shopping centers and quality shopping arcades were the most sought after asset types, representing 59% of all retail investments. The report also shows that investors are targeting existing shopping centers, securely let and liquid assets, to the detriment of retail parks in particular, which are considered as a higher risk.
The Germans are the most active, in the market followed by South Koreans, Dutch and British investors and the outlook is set to remain attractive. ‘With a forecasted investment volume of €3 billion by the end of the year, 2010 will represent the second best year of the decade for retail investments, after 2007 (€4.8 billion). Retailers, developers and investors will continue to favor prime assets, reinforcing the attraction of the main high streets of large French cities, well established shopping centers and new developments located within a large catchment area,’ said Bruno Ancelin, head of retail investment at Cushman & Wakefield France.
‘But the French retail market is still faced with some uncertainties. Weakened by growing competition and consumers who are spending more wisely, numerous shops have seen their rent-to-sales ratio increase considerably, making negotiations with landlords more difficult. The latter have been encouraged to concede greater incentives. The frenzied expansion of certain international retailers in the largest cities of France and also in medium size cities, along with the continued supply of new retail developments, may lead to possible over supply, which could weigh on the profitability and performance of the French market in the long term,’ he added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.