LONDON—France has the best-performing European real estate sector year-to-date, according to a Standard & Poors analysis of SNL's European real estate indexes, with the country's index achieving a total return of 7% as of April 26. SNL Financial is a subsidiary of S&P.
Paris
This news might be surprising to some market watchers, since the French commercial property market is currently in the grip of high vacancy rates and sluggish rental value growth. According to the IPD France Annual Property Index, released by MSCI in March, French commercial property returned 9% in the 2015 full year. But while capital growth was strong, income return was lacking, at 4.9% for all sectors and 5.1% for offices — the lowest level that the index has ever recorded, S&P says.
The UK was the worst performer in Europe in terms of total return year-to-date, according to SNL data. Shares in UK property companies got off to a rocky start in 2016, although many property watchers feel that they have been unfairly dragged down by wider negative sentiment among investors about the health of the FTSE 100 and FTSE 250 at the beginning of the year, S&P noted.
The performance of UK-listed property companies could also be the victim of uncertainty around the forthcoming referendum on whether to leave the European Union, although it is difficult to infer whether this is indeed a trend or not, based only on a few months' worth of data. The effects of a looming “Brexit” vote have certainly been felt in the direct real estate market, with Lambert Smith Hampton reporting that total UK property deal volumes had dropped by 27% to $17.1 billion (£11.7 billion) in the first quarter.
In keeping with the trends seen in the country index analysis, four companies headquartered in France landed in the top 10 companies by year-to-date total return, while over half of the companies ranking in the bottom 10 were based in the UK.
Interestingly, two Turkish REITs took the top spots among companies sporting the 10 highest returns year-to-date. Torunlar Gayrimenkul Yatırım Ortaklığı AŞ, a diversified Turkish REIT, held the top spot out of the SNL-covered European real estate companies with a year-to-date total return of 47.69% as of April 26.
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