25 October 2015, France | Corporate Finance | News
There was a marked upturn in the non-residential investment over Q3 2015 with a 56% increase in volumes compared with Q2 2015 and an overall volume of €6.38 billion; this is similar to levels seen in 2006 and 2007 over the same period. Overall, 2015 is set to be an excellent year which should be more or less on a par with levels seen in 2014.
The increased rate of investments carried out over Q3 2015, and for developments launched at MIPIM, is indicative of the ongoing decline in yields for core assets in Paris and the Inner Suburbs.
The most active players in the market are long-term investors (core funds, SCPI, insurance companies and mutuals). These investors are concentrating on products with managed risk (within deep office markets, mature or with strong potential; assets that are new, refurbished or recently completed; solid tenants; leases with long fixed-term periods, often equal to or in excess of 6 years) and often large unit sums (between €50 and €200 million).
Investors are being attracted by the favourable differential between real estate yields and bond rates and, with investors having seen impressive fundraising levels, French institutional investors are still the most active market players (almost 62% of volume) ahead of American investors who accounted for around 12% of volume.
Value-added or opportunistic deals remain scarce. There is also heightened competition in this market segment, except for those products with known illiquidity due to either a very secondary location or a mismatch between the price stipulated by the vendor and that offered by potential purchasers.
These main trends are set to carry on into the final quarter of 2015 and, for the time being, there are no macro-economic or geopolitical factors that would prevent them from continuing into 2016.