8 minute read
FRANCE IN FOCUS
Ardian’s Renaissance project in the Triangle D’Or, Paris
Holding steady
The COVID pandemic has pressed pause on investment across Europe, but France’s property market is faring better than most. The country’s strong fundamentals and an upturn in activity in the Paris offi ce market are causes for optimism, writes Isobel Lee
JUST like many of its European neighbours, France has seen investment volumes contract during the COVID pandemic. However, the country’s strong fundamentals and, in particular, its attractive office stock have helped landlords sail a relatively steady course over the last 18 months, according to local experts. “Like other real estate markets, France has seen investment in retail
properties go down, while logistics and living-segment assets are in considerable demand,” says Nicolas Verdillon, CBRE’s executive director of Paris region and investment properties. “But what really sets France — and Paris in particular — apart is the appeal of its offices. While 10-year average European transaction volumes pre-pandemic saw some 50% of all trades in office real estate, in France, the figure was more like 65%. French offices remain a compelling investment thesis, despite the trends that the pandemic has wrought and the acceleration in diversification strategies.”
Paris-headquartered Ardian Real Estate, which acquires office properties in major cities in Europe, says that it remains focused on “value creation in office properties” in its main markets, including the French capital. “We buy assets, reposition, re-lease and sell them,” says Stephanie Bensimon, head of Ardian Real Estate. “In terms of strategy, we haven’t really changed our minds. We still believe that offices are very relevant in the current market and have assembled a pan-European portfolio worth €2bn over the last three years.” However, Bensimon recognises that the world of work is changing, particularly after the rise of working from home during the COVID-19 lockdowns. “We have seen occupiers become increasingly demanding and we’re working on integrating their needs,” she adds. “The biggest tenants have clearer ideas than ever about what they want, but even smaller tenants want to change the way that they work and attract people back to their offices.”
Ardian is currently tackling a key project in the Paris CBD dubbed Renaissance — a rare new addition to the city’s Triangle d’Or (Golden Triangle). The project’s refurbishment programme, representing an investment of more than €40m, will reshape the entire Rue François 1er in Paris’ 8th Arrondissement. Connecting four historic townhouses, the scheme consists of luxury ground- and first-floor retail and a large new office complex at the heart of the block. “The office’s lobby and meeting-room areas are being designed like a luxury hotel lobby,” Bensimon says. “The future sole office tenant — law firm Allen & Overy — was in part won over by this element. Offering the right amenities is key to attracting the best tenants today.” While the best new projects are likely to be in significant demand, Bensimon flags a broader problem of falling demand for secondary stock across the Paris office scene: “We are seeing a lot of obsolescence in the centre of Paris, despite many investors tackling refurbishment drives. Occupiers and investors want the best assets and they want to be located as centrally as possible. But that’s also why we’re prioritising adding value to standing assets.”
Stephanie Bensimon: “Occupiers and investors want the best assets and they want to be located as centrally as possible. That’s why we’re prioritising adding value to standing assets”
Ardian’s Parisian peer Gecina has also traditionally focused on offices. “Location and centrality are the core criteria when selecting an asset. Paris and the western inner rim are still our preferred environment for offices,” says Gecina CEO Meka Brunel. She believes that Gecina stands out because its portfolio of assets, valued at around €20bn, with 80% consisting of offices, “cannot be duplicated”. She adds: “This portfolio is recognised for its outstanding environmental quality, with 80% of the buildings HQE in-use certified.” However, today’s real estate investors are also exploring living-segment assets in the spirit of diversification. “The residential asset class is very resilient,” Brunel adds. “There is a need to develop a residential rental offering for middle-class households to supplement the existing rental offering of social or intermediate housing and individual ownership. The current housing supply is not aligned with the rapid growth in the urban population and its expectations in terms of centrality, flexibility and environmental efficiency.” She reports that Gecina has set up two partnerships: one with Nexity to develop 4,000 housing units in the Paris region and major cities across France; the other with Woodeum to build low-carbon residential buildings.
COVID-related trends aside, post-pandemic Paris is also being shaped by other forces, from politics to major infrastructure drivers. Ardian’s Bensimon says: “Macron’s government ushered in a period of economic dynamism and France is today seen as an important market for in-
ternational investors. It has distinguished itself as an alternative to Brexit Britain for business and as a key start-up nation. Right now, we are emerging from the effects of the pandemic, but local elections resulted in more green representatives in office, which will add traction to the sustainability debate. The global message for investors is that greener assets and avoiding demolition where possible will help create the assets that people want to buy and occupy in the future.” Gecina’s Brunel agrees that sustainability is a central issue: “We believe that the players that will emerge in the best position over the coming years will be those that show themselves to be uncompromising on sustainable-development issues, that innovate in terms of services and that are committed to developing strong relationships with their clients.
Meka Brunel: “The players that will emerge in the best position will be those that show themselves to be uncompromising on sustainabledevelopment issues”
She adds: “We are targeting carbon neutrality for our operational portfolio by 2030. To accelerate our portfolio’s transformation, we have launched CANOP2030, our carbon net zero plan, and further strengthened the alignment of our project financing with our CSR [corporate social responsibility] goals, requalifying our existing bond debt as green bonds.” Meanwhile, Grand Paris Express, the largest transport project in Europe, is still on course to create a 200 kmlong web of subway lines that will connect almost all the suburbs in the Ile-de-France in the coming years. However, the scheme’s impact is not yet being fully felt on the real estate investment markets, suggests Verdillon: “Grand Paris Express is definitely going to make the length of some people’s commute easier. But we think the initial benefits will be even more notable for the inner ring road, the west inner ring and the north inner ring. Some investors are already focusing on this.” He adds: “One real estate benefit that Grand Paris Express seems to be bringing is in supporting the development of the ‘Silicon Valley Europeenne’ at Paris-Saclay.” This high-tech, science-focused business cluster will bring together around 15% of France’s public and private research labs, as well as academic institutions. The latter include the Ecole Polytechnique and the University of Paris-Saclay, which itself encompasses 14 universities, schools and organisations. Connecting all this to the centre of Paris will be the future Metro Line 18, scheduled to join Orly Airport to Versailles by around 2030. “Overall, I think that the Grand Paris Express will help make certain submarkets more liquid, but not all of them,” Verdillon concludes. “The other big benefit is to the environment. As Paris continues to focus on reducing car use, the city can hope that its improved infrastructure will help it reach key carbon-emissions targets.” n
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FRANCE: BACK TO BUSINESS
Market trends, opportunities, growth, crisis impact: “comment ça va” en France?
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