Market Research Presentation by Arnaud Violette, Colliers International
Experts Panel Discussion, Q&A
Foreign investors head for Paris, Europe’s new business hub
French domestic investors’ traditional dominance in their home market is being challenged by an increasing number of foreign institutions eager to buy assets in Paris and the regions, delegates heard at the PropertyEU European Outlook H2 investment briefing, which was held recently at Taylor Wessing’s central Paris office.
‘Acquisitions are picking up and more investors are coming from abroad: before 70% of transactions were done by French investors, now it has gone down to 46%,’ said Alfred Fink, partner, Taylor Wessing France. ‘There has been a real change in the last year and there is no doubt that France is more attractive as an investment destination, because there is a new political management in place the like of which we have never seen before.’
Asian investors are particularly active, said Fink, including the Japanese who are notoriously cautious about when and where to deploy their capital. Europa Capital, which is backed by parent company Mitsubishi Estate, has just opened a fully-owned office in Paris to invest in core real estate, offices in particular.
A European hub
‘It is no longer just words or rumours, I am here to tell you it is actually happening: Japanese capital is investing in Paris with a new vision of France as a hub to do business in the rest of Europe,’ said Andy Watson, partner, Europa Capital. ‘A year ago it wouldn’t have happened, but a lot has happened in a year.’
The attractiveness of the French capital to Asian investors is partly due to the city’s ambitious infrastructure project, Grand Paris, which will make connections between the centre and the suburbs much easier and faster, and to the massive building projects linked to the Olympic Games which will be held in Paris in 2024.
‘The Japanese like the infrastructure story and they feel right at home in a real megacity that has 54 mln m2 of office stock,’ said Watson. ‘They also appreciate the transparency of the Paris office market, it is a big plus for them.’
A changing office market
The new metro lines will revitalise new areas and create new office hubs, said Paul Raingold, president, Générale Continentale Investissements: ‘The Grand Paris project will work, and it will consolidate the status of Paris as a major capital city. Already the office market is strong and in the last year prime rents have begun to increase in the CBD. This positive trend will then spread to other areas.’
Strong demand, rising rents and a favourable financing environment means ‘it is a fantastic time to be in offices in Paris,’ said Renaud Jézéquel, general manager Paris branch, Helaba. ‘There is a lot of appetite for lending. The banks are in good shape and there are many other players like debt funds and insurers, so there is room for everyone to do their bit in financing.’
The office market has been changing in France and the coworking trend started by WeWork has taken root in Paris as well, said Arnaud Violette, general manager business development, Collier International France: ‘WeWork has been very strong in developing office space in the capital, and now French players are getting in on the act. The need to offer an experience and multiple services is not confined to the retail sector but it now applies to offices as well.’
Conversions made easier
‘Success in real estate now is the ability to create the right product at the right time,’ said Olivier Estève, deputy CEO Covivio. ‘In Paris we focus on offices and we recognise that the balance of power has shifted to the tenant, who now demands more services and more flexibility. This is why we are launching our own offer of flexible offices.’ Covivio’s answer to WeWork is Wellio, described as ‘pro-working spaces’ open to companies of all sizes as well as individual entrepreneurs and freelancers, with a goal to offer 70,000 m2 of space by 2022.
Paris has more offices than any other European city, but some were built between the 1950s and the 1970s and are now obsolete or non-compliant with current building regulations or tenant demands. ‘We must remember that of the 54 mln m2 of office stock, 45% are over 25 years old and change is much needed,’ said Raphael Tréguier, founder and managing partner, Kareg Investment Management. ‘We specialise in converting old office buildings into residential units which are much in demand. A new law has just been approved by our Parliament to facilitate this kind of conversion, so we are encouraged by this and by the many other reforms that have been implemented in the past year.’