'Macron effect' boosts sentiment in French real estate

The ‘Macron effect' is working its magic on the French economy and market sentiment, with positive consequences for the real estate sector as well, delegates heard at the PropertyEU France Investment Briefing, which was held on Wednesday at Taylor Wessing’s offices in London.

'It is a very exciting time for France and in particular for Paris,' said Oliver Kummerfeldt, European real estate analyst at Schroder RE. 'The economic momentum is making the market attractive and it offers many opportunities for investors. Macron’s election has provided stability and sentiment is high.'

GDP growth has been revised up significantly, from a forecast of +1.3% in January to +1.7% for this year and for 2018 as well, unemployment is edging down, long-delayed reforms are underway and market sentiment is positive.

Higher take-up
This is already been reflected in the figures, said Kummerfeldt: 'Office take-up in Greater Paris is up. Occupiers have released the brakes and are actively looking for space or taking up additional space, so office vacancies have started to decrease.'

The year started cautiously because of uncertainty over the elections, but activity has rebounded in Q3 and it looks like the year will end on a high note, he said.

France’s economic fundamentals were clearly improving before Macron’s election, but the new president has boosted confidence.

‘The key message is that business confidence is back in France,’ said Raphael Tréguier, CEO of CeGeREAL. ‘Take-up of office space has been increasing for the last five years, but nevertheless the Macron effect is real.There is positive momentum, with more investments creating more employment, which in turn generates the need for more office space.’

Green is good
Construction activity has been increasing, so there is more supply in the pipeline. However, the market will remain balanced, said Kummerfeldt: ‘I do not believe that additional supply poses a risk to rental growth, because there is great demand for new buildings, flexible spaces with sustainability credentials.’

Green offices have now become a must in France, panellists agreed. ‘You have to be green: it is part of the market mindset now,’ said Guillaume Turcas, a property expert. ‘Tenants ask for certification as well as good connectivity. They have become the two main requirements.’

Sustainability is the correct and responsible thing to do but it can also improve returns, said Tréguier: ‘When corporates choose an office, of course location is important but sustainability is also top of the list. We have been letting our buildings quicker, so sustainability has been a good bet from a purely financial point of view. Being green was an objective, now it is normal.’

Location of course remains crucial and nowhere more so than in Paris, where the market remains polarised. According to Schroder Real Estate research, the variations between areas are huge and should be taken into consideration by investors. Office vacancy rates, for example, go from 2% in the CBD to 15% in other areas of the city.


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