When will the French property market stabilise? (Comment by Nic Fox of Europa Capital)

Europa Capital has turned over €800m (£702m) of investment in France out of more than €5bn (£4.4m) of business conducted overall. But since late 2007 we have held back as the credit crunch has taken hold, values have fallen and occupier demand has contracted

The key questions are whether the market has stabilised and whether yields have stopped rising. Unfortunately, the answer to both questions is no. There is a continued denial on the part of French property owners and their valuers, and many will not accept that the factors causing values to fall elsewhere will have a corresponding impact in France.


The result is that funds are maintaining values or making modest writedowns based on a handful of deals closed in recent months, and next to nothing is trading. In May, CB Richard Ellis said first-quarter investment volumes were down by 45% on the last quarter of 2008. This is hardly evidence of a market reaching stabilisation.

The French market is generally less leveraged than the UK’s or Germany’s, so the impact of the banking crisis and the issue of loan default are less dramatic. But France cannot be immune from a global reappraisal of real estate pricing. Moreover, it cannot be immune from a continued global economic contraction that is causing rents to fall as a consequence of a fall in occupier demand.

My approach to France right now would probably best be described as ‘disciplined’, ‘cautious’ and ‘patient’. At Europa Capital we are looking to invest a significant share of our current fund in France, particularly in the Paris Ile-de-France market, and this will probably be oriented towards retail, offices and possibly residential. But we may need to wait 12 months before we see a sufficiently attractive combination of pricing and opportunity.

French lenders are selectively readying themselves for this opportunity, and foreign lenders, particularly German mortgage banks, are already active, albeit on terms somewhat more stringent and restrictive than those we have been used to. This is welcome, but if property is returning to being an ‘income and yield play’, we will continue to exercise restraint until such a time as sellers have removed the blinkers and adjusted their expectations, just as their neighbours have done already.

Postscript :

Nic Fox is head of middle Europe at Europa Capital, with responsibility for acquisitions in France and Germany