Paris capital values decline for 1st time since 2009, says IPD


Capital values for French offices declined 0.9% in the first six months of 2014, despite signs of recovery in Paris' La Défense district, according to the latest IPD France Biannual Property Index.

Office rental values decreased across all segments with yields also posting a decline. This resulted in an overall half-year office return at end-June 2014 of 1.9%.

'While La Défense seems to be recovering slowly as vacancy rates stabilise and the decline in market rents slows down, Paris shows some signs of weakening. For the first time since 2009, Paris capital values are decreasing as well as market rents, but the vacancy rate remains stable,' said Stéphanie Galiègue, executive director and head of Southern Europe.

By contrast, retail values were constant over the last six months, thanks to stable yields and increasing market rents. Nonetheless, total returns for French retail declined to 2.5% in the first half of 2014, resulting in an annual retail return of 5.8% for the full year.

Compared with other asset classes, the direct return on property of 2.2% for H1 2014 was far below that of property equities (MSCI FR) which registered the strongest performance at 19.8%, much higher than for the previous six months. They were followed by bonds (JP Morgan GBI Global, FR 7-10 years) which returned 8.1%, also greater than the December 2013 performance at 1.2%.

The IPD France Biannual Property Index is based on 1,113 directly-owned properties in 38 separate portfolios, with a total value of €24 bn as at 30 June 2014.


Tags : IPD

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