French RE Demanding Strategic Value-Add Transformations

Written by Helen Richards

Discussions at the French regional panels at Europe GRI 2023 suggested an improved fourth quarter, and an overall pragmatic outlook for 2023, with forecasts for 2024 expecting more substantial market volumes. Anticipation of market developments underlined the necessity for swift responses to shifting market conditions.

Panels gathered leading French real estate players to discuss a range of asset classes and strategies. Particular optimism was shown for opportunities in logistics, health, and the transformation of offices into residential properties, while complexities in value-added projects, urban planning, heritage preservation, and ESG were highlighted as challenges to consider.

Offices into Residential

A promising opportunity that garnered attention was the transformation of office spaces into residential areas. Following the office crisis in the US, American investors have been quick to adapt to this trend, contrasting with their French counterparts. The adaptability of American players and their willingness to accept losses to embrace new opportunities was noted.

Value-Add Complexities

Executing value-added projects in Paris is far from straightforward. The city's maze of rules and regulations can be daunting.

The scarcity of appropriate property types in Île-de-France, except for offices, has intensified the need for strategic transformations, all while adhering to ESG standards. Strategies focusing on value addition with longer time frames were recommended as a means to mitigate risks, given the anticipated shifts in market cycles over the next 4-5 years. 

Participants also emphasised the importance of mitigating administrative risks by obtaining necessary permits before purchase, particularly for assets with significant administrative complexities.

Data

One noteworthy observation in today's real estate landscape was the abundance of data related to flows and transactions, overshadowing information about inventory. This data bias is largely attributed to real estate agents who primarily report their transactions. While transaction data provides valuable insights, it's equally important to scrutinise data and trends when the market remains stable and consistent.

Urban Planning and ESG

The Bioclimatic Paris Local Urban Plan (PLUb) continues to dominate discussions on the future of the city with its wide-ranging impacts on the real estate industry and ambitious climate goals. Addressing the climate crisis, particularly in the face of increasingly hot summers, is a central concern. To achieve the goals of the plan while maintaining the rich heritage of Paris requires complete functional diversity encompassing residents, employees, cultural venues, sports facilities, schools, and commerce.

Île-de-France is marked by perpetual population growth, presenting opportunities and challenges. Spatial planning aims to create a polycentric region with 27 hubs centred around train stations, fostering economic activities and balanced growth, while, once again, always considering climate change. With real estate constituting a significant portion of energy consumption, energy renovation in buildings holds great potential.

All key takeaways from Europe GRI 2023 are published on the GRI Hub. Join GRI Club Europe to gain exclusive access to events, club meetings, and invaluable insights first-hand.

The France discussion will continue at ‘Rémunération du risque immobilier’ Club Meeting on November 21 in Paris, and ‘Financement et Refinancement’ Club Meeting on November 23 in Paris. Read more and register now.