Following a particularly active H1 with €536 million in investments, the Lyon investment market has slowed considerably. "Only" €51 million was invested in Lyon over Q3, taking the overall investment volume to €587 million.
Market activity therefore appears to have slowed somewhat over the last few months; this has mainly been due to the lack of deals for values in excess of €15 million. The lack of prime supply on the market is clearly having an impact. 11 transactions were recorded in Q3 alone (compared with 13 over the same period last year) only one of which was for more than €15 million. Although lower than in 2015, performance at the beginning of the year has allowed volumes to reach a level that is 26% higher than the average Q3 figure for the last 5 years. Concerns therefore remain relative and the first two quarters were highly active thanks to two large leases. These transactions include AEW EUROPE's acquisition of the "Le Triangle" office building in the Part-Dieu district for almost €54 million as well as PRIMONIAL's purchase of the office building "Universaône" (12,782 sq m) which was completed in 2013 in the Lyon Vaise district for around €50 million.
However, most acquisitions were for assets under €15 million. 26 of the 38 transactions were carried out in this segment for a total of €165 million. The average transaction value, normally around €12 million for single assets, stood at only €4 million in Q3 2016. Examples include SHAM's acquisition of the "Fakto" office building in Villeurbanne which has 6,186 sq m of space for close to €15 million, as well as another by SWISS LIFE REIM for the "Récamier" office building in the 6th district of Lyon which has 3,500 sq m of space for €13.5 million. These "small" disposals still form a considerable and solid foundation for the Lyon market.
The Lyon market is traditionally diverse in terms of asset type. Offices continued to be the asset of choice accounting for €448 million in investments or 76% of the overall volume. However, other assets were not overlooked. Industrial and logistics accounted for €121 million since the beginning of the year, representing 29% of investments in the Lyon region. Deals of note included GOODMAN's acquisition of a 43,000 sq m class-A warehouse in Satolas-et-Bonce for €27 million as well as another by VAILLANCE IMMOBILIER for a group of industrial buildings (9,100 sq m) on a site called Espaces des Portes de l'Est in Saint Priest for €6 million. Retail assets, which had been lacking at the beginning of the year, made a comeback with HERACLES INVESTISSEMENT's forward funding speculative acquisition of 11 retail sites at Ilot Ynfluences Square in the Lyon Confluence submarket.
Forward-funding sales are becoming increasingly popular. While there has been an average of 7 per year since 2010, at the end of September there have already been 7. Investment in this type of asset stood at €158 million representing over a quarter of the overall volume. Occupier appetite for this type of space makes this category a secure and liquid asset for investors. Forward funding sales (VEFA) have seen great success in the office investment market this year and have accounted for a third of investments. For example, UNOFI GESTION d'ACTIFS acquired "Linux", the future headquarters for the DANONE subsidiaries BLEDINA and NUTRICIA AFRICA, with over 11,000 sq m of space in Limonest for €52 million. In addition, there was AEW EUROPE's speculative acquisition of the "Oxaya" building in the North of the Gerland submarket for €23 million.
It came as no surprise that national (and local) players dominated the Lyon market, both on the buy and sell sides: 68% of vendors and 81% of purchasers were French. These included a private investor's turnkey acquisition of EFS (ETABLISSEMENT FRANÇAIS DU SANG) in Décines-Charpieu for €19 million and KEYS ASSET MANAGEMENT's acquisition of "Le Seven", a 6,270 sq m office building in the Gerland district for €21 million.
International investors were also active and accounted for around a quarter of the overall investment volume. Noteworthy transactions include ROCKSPRING's acquisition of an 18,700 sq m warehouse in St Quentin Fallavier for €8 million.
Given the lack of supply, competition for prime assets remains strong. The prime office yield in Lyon therefore saw further compression over Q3 2016. It now stands at a historic low of 4.50%. This compression also applies to other asset classes as the best industrial and logistics assets are currently being negotiated at 7.00% and 5.50% respectively.
The climate is still favourable for asset disposals as investors in the marketplace continue to benefit from the combination of low yields and the strong level of demand to dispose of their assets in the Lyon region. As financing terms have been relaxed, purchasers are increasingly on the look-out for opportunities.
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