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France: Investor interest holds steady


1st February 2015

Despite a suffering economy sat within a suffering Europe, France’s real estate market still holds an allure for many investors, particularly in the commercial and luxury residential sectors.

France may still be in the grip of President Hollande’s austerity measures, but for many it still retains a certain ‘je ne sais quoi’; its prime property market continues to attract the rich and famous, while its commercial and retail markets remain world leaders, with the Champs-Elysées Europe’s most expensive retail location.

Knight Frank’s France Prime Residential Insight 2014 pointed to a return in British property investors, most notably buying properties in South West France, the Côte d’Azur and Provence.

Property prices in South West France have declined steeply since the market’s peak in 2007, down by 40% according to Knight Frank.

However, all is not doom and gloom. The Knight Frank report showed that on the Côte d’Azur the sub-EUR 1.5 million and EUR 5 million price brackets recorded the most prime market sales in 2013, with this carrying on into 2014.

“As expected we did witness a notable increase in transaction levels across our French network this year, in fact the number of sales is up some 30% on 2013,” said Mark Harvey, Head of French desk, Knight Frank.

The falling value of the euro throughout 2014, along with some government incentives – an additional tax discount of 25% was put in place for properties sold between 1st September 2013 and 31st August 2014 – have kept the French market somewhat afloat.

According to Knight Frank’s Harvey, Gascony continues to remain an attractive option due to its incredible value, while Cap d’Antibes, Courchevel Village and Chamonix remain markets to watch.

“In Cap d’Antibes prices have, in some cases, come off as much as 30% since the start of the crisis and as such offer a compelling entry point for those seeking something special on the Cap,” Harvey explained.

“Courchevel Village is benefitting from substantial infrastructure investment and the town hall’s determination to create a more level ‘playing field’ between 1850 and the other parts of the resort. With a moratorium in place, value and income seekers can still hope for capital growth and enjoy tax rebates on off-plan residential projects.

“Meanwhile, Chamonix – unequivocally the year round destination for thrill seeking, adrenaline charged outdoor people – is becoming ever more upmarket and attractive a destination due to its proximity to Turin and Geneva, which also adds to the investment story,” he added.

Knight Frank’s France Prime Residential Insight 2014 said that prices in some regions were at a seven-year low, and that a number of cash buyers are now seeing value in the market. However, for non-cash buyers, the tumultuous fortune of the euro has led many overseas investors to purchase property with a Euro mortgage, as a way of mitigating any future fall in the currency. This has been endorsed by a low cost of borrowing.

“Domestic sales are falling, as are prices, down 4.5% in some areas. However, things seem brighter for external buyers who can enjoy impressive discounts and access to cheap money as well as the dwindling euro,” confirmed Knight Frank’s Harvey.

He added that, in the last twelve months, most markets were down, with the exception of Chamonix and Gascony, which have held steady.

For future investors, Harvey said: “Off-plan apartments in key international destinations present some of the best opportunities at present.”


It’s not just HNWIs that want to relocate to France. Commercial real estate enjoyed somewhat healthy rates of business throughout the first three quarters of 2014, according to statistics from Savills.

The international real estate firm predicts that investment in French commercial real estate could reach EUR 21 billion [USD 25 billion] for 2014, a 19% increase on 2013 figures.

Driving this growth are larger transaction volumes, with several deals worth more than EUR 500 million inked in 2014. Savills stated that the volume of portfolio deals in France had also risen, up 58% for the first three quarters of 2014, compared to the same period a year previous.

Top of the commercial investors list is Paris Île-de-France, which took 67% of the national investment volume in the first three quarters of 2014.

Savills noted that investment from overseas buyers continues to increase, accounting for 43% of deals up to 31 September 2014, an 8% increase on 2013 levels.

U.S. equity funds have reportedly been particularly active, with Lone Star purchasing Coeur Defense for EUR 1.3 billion. Middle East investment has also increased, accounting for 9% of total investment in the first three quarters of 2014, up from 7% in 2013.

Office space remains a premium, accounting for 56% of investment volume in the first three quarters of 2014, while retail is hot on its heels, thanks to some very lucrative deals. French supermarket chain Carrefour acquired 57 shopping centres in 2014, for a combined purchase price of nearly EUR 2 billion – the biggest deal recorded in 2014.


Paris continues to be one of the leading retail destinations of the world, along with New York and London. The city attracts the ‘who’s who’ of luxury brands, all vying to open the biggest, most luxurious ‘flagship’ stores in the most prominent locations.

2015 forecasts from JLL show that luxury retailers in particular are expanding rapidly into Paris’s prestigious shopping areas and emerging hot spots.

Both shopping centres and high streets are attractive to shoppers, with centrally located Parisians preferring areas such as the Champs-Elysées, Opéra and Boulevard Haussmann.

According to JLL, the Champs-Elysées has recently welcomed such new tenants as Abercrombie & Fitch, Banana Republic, MAC Cosmetics and Tiffany & Co. Rents have soared in recent years, breaking record levels as demand has far outstripped supply.

Out into the wider city, new districts are emerging and others are expanding or strengthening their high-end positioning. Since 2011, some of Paris’s largest schemes have been developed, including the refurbished So Ouest in Levallois-Perret and Beaugrenelle in Paris, as well as Aéroville near Roissy Charles-de-Gaulle. The planned refurbishment of the Forum des Halles will signify the largest urban project of the last 30 years in the heart of Paris. Completion is planned for 2016.


Paris continues to attract cross-border investors from Asia and the Middle East with the latest data released from JLL in December 2014 forecasting that these investors will invest over USD 10 billion in international markets over 2014.

Chinese investors began investing in Paris over two years ago. Around 15 significant office and hotel transactions have been carried out, including the acquisition of the Marriott hotel on the Champs-Elysées by a Chinese group via its Hong Kong based holding company. Asian investors have invested EUR 900 million since 2008 and have been behind virtually all of the hotel transactions that have taken place in Paris and its inner suburbs.

“Asian institutions, such as sovereign wealth funds or insurance companies, are using real estate as an asset class in its own right. They’re targeting Paris by selecting Core or Core+ risk profiles with large unit sizes, generally between EUR 150 and EUR 200 million as a minimum,” explained Alexandra Yinying Li, Head of Asia Business Development & Investor relations at JLL.

Since 2012, Middle Eastern investors have accounted for 28% of overall real estate investment (offices, retail, industrial and logistics) in the Greater Paris Region. One of the largest transactions of 2014 was carried out by the Olayan family with Risanamento’s disposal of EUR 1.3 billion of assets.

France’s domestic economy may be somewhat more austere than previously, but its real estate market continues to be a dominant force with overseas investors.