RCA Insights

Politics Keeping a Lid on Activity in Europe Again? This Time France

By on May 5th, 2017

The first quarter of 2017 was a slow one for the French commercial real estate market. Overall volume was down 36% versus the same period in 2016, the investment total in Paris was the lowest recorded since 2009, and cross-border investment fell by €1.0b ($1.1b) to reach €1.6b at the end of March.

These statistics put France alongside the U.K. as one of the worst performing of Europe’s larger markets. Both performed in stark contrast to Germany, where the Q1’17 investment level marked the strongest start to a year that RCA has recorded.

One of the main talking points in the European market has been political risk and the Q1’17 investment outturn in France suggests the election cycle there may have had an effect on activity.

1705 France main-01

Granted, correlation does not imply causality, but this is something we have seen elsewhere in Europe too. In the U.K. RCA recorded a sharp drop-off in investment volume prior and post the June 2016 E.U. referendum. Meanwhile, in the Netherlands, which went to the polls in March, the market endured its slowest quarter since 2014 in Q1’17 as investors eyed whether populist Geert Wilders would prosper. He didn’t, and as of the end of April completed investment volume totaled €1.6b and there is another €700m in pending acquisitions in the pipeline.

The centrist in the French presidential race, Emmanuel Macron, is approximately 20 points ahead of right-wing Marine Le Pen in advance of Sunday’s poll and it would not be unreasonable to suggest France could see a similar boost after the vote should Macron win. There is just under €1.5b of pending acquisitions in France and with the volume of capital in the market, a centrist victory would provide a boost, not just to France, but to the rest of the European market which views right wing populism as one of the main threats to the current investment environment. Of course, if Marine Le Pen wins it would appear all bets are off.

Tom Leahy

Tom Leahy

Senior Director, EMEA Analytics

Tom joined RCA in 2014. In his role as Senior Director for the EMEA region, Tom is responsible for the development and expansion of the market analytics service for RCA’s European clients.

Prior to joining RCA, Tom was an Associate Director and then Head of Research at UK-based property consultancy, Lambert Smith Hampton. He started his career as an analyst at research consultancy Property Market Analysis (PMA).