Commercial Real Estate Soars In France But The Looming Election Casts A Dark Shadow

The Brexit vote has been a boon for France’s commercial real estate market—but is it too good to last?

By Jeff Vasishta March 2, 2017

France could be about to blow a good thing. The Brexit vote has sent many London-based companies scuttling across the English Channel to relocate in Paris and elsewhere, causing commercial property prices to head skywards. Now, with France’s own general election looming and far right candidate Marine Len Pen, who is threatening too to pull France out of the EU, looking good in the polls, it remains to be seen if France will preserve its newly coveted position or pass it on to Germany.

Buying in France now “is a big bet,” said Will Woodhead, head of France at property broker Savills said in The Wall Street Journal. “The elections have to go well.”

As prices have risen yields have fallen, which is common. Cash flow may have once been king, but the sudden upsurge in property value has been due to a frenzied $9.7 billion of real estate deals in the last three months of 2016, compared with less than $6 billion in each of the previous three quarters, according to Real Capital Analytics.

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Now landlords are sitting pretty, hoping political stability will preside over an increasingly volatile Europe and keep the coffers rolling their way. The high demand among companies for office space may present landlords with a double whammy, increasing the prospect that rents will rise along with equity, a scenario helped by low interest rates.

“We’ve been able to feed better in France than we have for a long time,” Ric Lewis, chief executive of Tristan Capital Partners, a London-based real estate investment manager told the Journal. He says that his company has purchased about €600 million ($633.7 million) worth of French property in the past nine months.

There’s little doubt that Brexit has focused the spotlight on Parisian real estate. Rob Wilkinson, CEO at AEW Europe, which invests on behalf of global clients stated that many investors from the U.S. or Asia feel they don’t own enough French property in their portfolios.

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Big commercial deals have been thriving, too. They include the €1 billion purchase in December by Norway’s giant oil fund of an office building in central Paris. The yield on the Vendôme Saint-Honoré sale was 3.1 percent, Swiss lender UBS estimated. In December AEW bought a portfolio of business parks in the Paris suburbs for about €141 million on behalf of an Australian investor. A big attraction was the potential return compared with what is available in the center.

And then, of course, there is the fact that Paris is Paris, a global brand in itself, drawing luxury stores along the Champs Elysées and almost €450 billion in retail sales in 2016, up 2.2 percent on the previous year.

France in ranked in the top five countries of the Global Real Estate Transparency Index. It is the only country in continental Europe identified as ‘highly transparent’ in the study produced by JLL (Jones Lang LaSalle) and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index (GRETI).

JLL’s Global Real Estate Transparency Index, covering 109 markets worldwide, ties transparency to real estate investment, business activity and living standards. According to JLL, the top ten highly transparent real estate markets attract 75 percent of all global investment. And that’s a lot of money.

Landlords and investors alike across France will surely be praying for a catastrophic Marine Le Pen loss when voters go to the polls on April 23rd.



Jeff Vasishta



Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

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