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French investors who invest in Europe

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Nicolas Dalili, Associate Director for BNP Paribas Real Estate International Investment Group talks us through why French investors are investing in Europe and how they’re going about it.

Can you tell us about your role and what it involves?

I am part of the International Investment Group (IIG) which looks after investors looking to buy or sell assets outside of their domestic markets. We cover all sources of capital coming into Europe, notably Asian and Gulf investors through our platforms in Dubai and Hong Kong, but also North American and pan-European investors. I am personally focused on the latter, working hand in hand with local investment teams to source cross-border investment opportunities that match our clients’ strategy. I also regularly review our key clients’ portfolios across Europe to identify potential sales mandates or buy side/off market opportunities. Despite primarily focusing on investment transactions, this is more a relationship management role than a pure brokerage position.

I started working for BNP Paribas Real Estate IIIG in Paris and have recently moved over to the offices in London. This was important as several French clients are actively looking to invest in the UK market, and conveniently there are also a number of French natives working for London-based funds. This has in turn allowed me to continue working with French clients but also develop the UK side of the business.     

Nicolas Dalili
Nicolas Dalili, Associate Director (IIG)

     

What are currently the most important things that you are working on?

At the moment I am managing the sale of an asset in London on behalf of one of our key investors, along with the London City Investment team. We have been building up the relationship with this client at a European level for more than four years and following a successful transaction, they have trusted us with the sale of the largest asset in their portfolio. In the meantime, I am actively looking at investment opportunities in other European countries in order to reinvest the capital.

With clients, it’s often the case that they will know which country they want to invest in but perhaps not which city or asset type, so it’s my job to provide that educational service and give clients the information they need to make an investment decision. This encourages strong, lasting relationships which incite clients to keep coming back to us for buying and then later selling their assets.

What can you tell us about the typical profile of a French investor?

France has a very strong and diversified investor base. They tend to be from be from insurance companies, Investment Managers, SCPI, REITs, and there are the growing pension fund sector and private individuals. Although French investors are traditionally cautious and tend to focus on property in France, there are still big names in the property sector, with the top four French companies managing more than €125bn of real estate assets globally.

What can you tell us about French investors investing in Europe? What would be the reasons for doing so?

To start with all of them have already invested in France and are subsequently looking to diversify their portfolio. They’ve generally taken what they consider to be enough risk in France and therefore want to look for something abroad that offers a risk-return balance that they might not be able to find domestically. This allows them to become international players, and in some cases get higher returns than from their assets in France.

Since 2011, we have seen an acceleration of foreign investment by French investors across Europe. From €2bn in 2011 to around €10bn from 2015 onwards. BNP Paribas Real Estate is very adapted to respond to the changing strategies of our investors. Our international approach and acute knowledge of the various markets and asset types allow us to understand and perfectly respond to the aims of each of our investors and therefore provide the support and guidance that is needed for foreign investment.  

What are the top countries that these investors are investing in? Why?

Germany has been the top destination for French capital for four or five years now, as it is seen as the most stable market. Following Germany, French investors tend to go for the Netherlands, Italy, Belgium and Spain. In all countries, French investors are mainly looking for offices and retail and in some specialist cases, logistics.

Germany’s economic and financial stability is obviously an important driver in why it remains in top place, but this is further strengthened by the decentralised structure of the country and consequently of the real estate market. Whilst London and Paris dominate the majority of investment volumes in their respective countries, you have to take into account the Big 6 German cities (Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg and Munich) in order to reach an equivalent proportion. This results in a more balanced market with low but regular and less volatile rental and capital growth prospects.

What kind of assets are they investing in?

Investors often have different strategies when they invest abroad, compared to how they go about the process in France. The majority of French investment in Europe is within the ‘core’ segment but we see investors moving higher up the risk curve once they are more familiar with local markets.

It's worth noting that office is the primary destination in terms of asset type, accounting for 50% of all investment volumes in the past two years (July 2016 to June 2018, RCA). Retail 20% hotels 13% logistics 4% residential 6%

What are your predictions for how the relationship between French investors and Europe is going to change /evolve?

Well firstly it’s important to point out that large French investors have already invested all across Europe.

Then there are SCPIs, who have mostly already invested abroad, whether that be just one asset, but they have made the step in the last five years to go abroad. They are now building up their own knowledge and diversifying within the countries they are already present in, and the types of assets.

Insurance companies are investing abroad as well but have either been using Investment Managers or invested in funds with international strategies. We can see more of them investing directly in the near future.

In terms of destination, we can see investors moving into less traditional markets such as Central and Eastern Europe and non-Eurozone countries. The UK market is also becoming comparatively attractive and we see funds and private investors trying to benefit from a pricing/currency combination.

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