Zoom in on Investment

Our commercial valuation team values office, retail, logistics and mixed-use assets all over France and has been particularly active over the last few weeks whilst #workingfromhome. Our team has continued to work on both fund reporting and secured lending valuations for acquisitions. We are now delighted to be able to physically inspect properties wherever possible, ensuring that all appropriate precautions are taken.

Office buildings in the business district of La Defense, Paris

We are in constant contact with our clients; investors, developers, retailers, banks, and of course our Knight Frank transactional and pan-European teams. Naturally it will take time to restore confidence and to gain visibility, but we are keeping at the forefront of the market to closely monitor the outlook as it evolves. Knight Frank Research produces excellent articles and publications, and these provide insight into how our research teams and agents see the market. The latest publication studies the potential impacts of Covid-19 on the French investment market:

Covid-19 – What are its implications for the French investment market?

These are the 10 key investment points we feel are important to take away:

  1. €6.2 billion was invested in French commercial real estate in Q1 2020, the third best quarter in history after 2006 and 2007; it could have been even higher but lockdown severely curbed activity from mid-March.
  2. Prime yields reached historically low levels in 2019 and did not change in Q1 2020; they remain below 3% for the best office and retail assets in Paris and close to 4% for logistics assets in the North-South backbone.
  3. The impact of the Covid 19 crisis on office yields remains to be measured: increased market polarisation in favour of core assets may alleviate the rise in prime yields while halting yield compression on secondary / revalued assets, thereby restoring a risk premium diluted in recent years.
  4. Investors’ appetite for logistics, whose strategic role has been so obvious since the beginning of the lockdown period, should also increase, while other types of assets, directly and profoundly impacted by the health crisis (hotels) will be subject to greater selectivity.
  5. Despite the rental market’s poor results in Q1 2020, the best logistics assets should nonetheless perform well given the needs linked to the health crisis, the foreseeable growth of e-commerce and the strategic role of the supply chain.
  6. Retail investment has inevitably slowed down, with investors concerned by the uncertainty linked to the virus and its consequences on the retail sector; however, not all formats will suffer; food shops & retail parks are the most certain to show resilience.
  7. A few significant core deals are still ongoing with a very moderate rise in yields; secondary locations are the assets that will suffer the most.
  8. Despite the health crisis, real estate remains key in investment strategies; the French real estate market is approaching this crisis with better fundamentals than in previous times.
  9. Investors are likely to favour core assets in order to secure their rental flows in a context of rising corporate failures and rising vacancy rates.
  10. More profound transformations may result from the epidemic, as investors and the real estate industry as a whole acquire a better understanding of managing health risks in buildings. 


Kate Begg, MRICS, CIS HypZert (MLV), Partner, Head of Commercial Valuations

Héloïse Felman, MRICS, REV, CIS HypZert (MLV), Partner, Commercial Valuations

Emilie Vialie, REV, Associate, Commercial Valuations