This episode of Kyle’s Take features coverage of French real estate performance across product types throughout COVID, noteworthy investment projects, insights from the interview with Alon Kasha, poll results, and a preview of the next guest.
00:42 – Paris COVID Protocols
Kyle kicks off by providing his observations on dining, shopping, and socializing in Paris with the US vaccination card and “passe sanitaire.”
2:02- BREAKING NEWS
2:11 – High-level residential performance
Although prices in France’s prime residential markets were up 1.3% in 2020, they were down across Paris 2.3%. In general, minimal movement from the city to suburbs took place. Cumulative sales were up 5% in the six months through February 2021.
2:41 – Effect of Stimulus Payments
Combination of €604 billion in government support and lowest mortgage rates in 50 years have helped to stabilize market.
3:08 – Domination by French Buyers
International travel bans caused percentage of sales from French buyers in Paris to reach all-time high of 60%.
3:30 – Market Drivers
Supply constraints, notable infrastructure projects, and the 2024 Olympics are combining to propel the market forward. The market is expected to remain in favor of sellers until the May 2022 Presidential election begins to cast uncertainty.
4:10 – Grand Paris Project
Europe’s largest transportation initiative (€28 billion) will represent 200km of new metro lines (bringing total to 400km), allowing outlying areas of Paris to have a direct link to the inner city. Largely funded by public entities, the project is only rivaled in magnitude by undertakings in Saudi Arabia and China.
5:45 – Investment Sales Market
While sales across product types declined during COVID, retail and office suffered the most. Market fundamentals are now relatively solid with the Paris region continuing to act as a safe haven for investment.
07:33 – Industrial Growth from E-Commerce
The rise of online shopping and supply chain disruptions have caused significant yield compression in the sector.
07:51 – Rebound Expected in Late 2021
Q2 2021 sales volumes were down 36% compared to Q2 2020 due to withdrawal of assets from market, pandemic uncertainty, and high pricing for value-add deals. The €8 billion invested in the first half of 2021 represents a 31% decrease from the same period in 2020, yet only an 11% decline over the 10-year average.
8:58 – Investor Sentiment
Retail has attracted the most limited interest, though high-street investments with long-term leases and credit tenancy are still attractive.
09:25 – Sources of Capital
While the strong base of domestic capital continues, a notable increase in foreign capital has occurred in recent months (44% of all 2021 transactions). US and German investors are very active. Investments from Asia Pacific very limited because of travel restrictions.
10:17 – Outlook for Remainder of 2021
Equity will remain abundant and chase yields that are favorable relative to bonds. While investments will not return to pre-COVID levels, they should approximate the 10-year average. Prime yields for logistics will compress below 3.5%.
10:56 – GUEST INSIGHTS
11:00 – A “Grey” Market
Dealing with the city and its various departments is not a “black and white” situation when it comes to permits and approvals.
11:50 – Tremendous Apartment Demand During COVID
Alon’s apartments in Saint-Germain-des-Pres received numerous all cash offers, most of them without the buyers seeing the respective properties.
12: 32 – POLL RESULTS
Kyle reveals the results from his last poll, which was:
Which of following countries will experience the largest year-over-year change in tourist visits?
- Greece – 35%
- Italy – 15%
- Spain – 28%
- Portugal – 15%
- France – 7%
The next poll will be:
When will the major tech companies (Facebook, Amazon, Apple, Netflix, Google) return to office?
- December 2021 or earlier
- January 2022
- February 2022
- March 2022
- April 2022 or later
14:30 – NEXT GUEST
The next guest on Global Real Estate Dealmakers will be the co-CEO of a prominent real estate private equity firm that invests in retail and hospitality assets throughout Mexico and the Caribbean.
