F. Allouche (CBRE): “The real estate sector must act!”

Decision makers. Can you give us a general overview of the commercial real estate market in France?

Fabrice Allouche. Overall and regardless of the affected products, or: retail, hotels, offices, logistics, the rental markets show fantastic dynamics. The level of trades and demand are doing well. However, on the investment side, we are starting to see some form of wait and see. During the acquisition phases, investors wonder what the “new deal” is, they ask us questions about the fair value of the assets. When they sell, they want to maximize value, and when they buy, they want to minimize it. Of course, this predicts a lot of procrastination and reflection. We are going through a period of uncertainty, which we hope will be short-lived, and it should a priori end of the year where you need to understand how the market works.

For our part, we do not have enough retrospect, negotiations remain open and discussions are piling up. We will have to learn to value the markets with a new grid of asset values. The first impact relates to the increase in returns as a result of the increase in financial rates. The second impact relates to the reduction of liquidity ready to be invested, although it is still very significant. The third impact will focus on compliance with commitments (covenants) of borrowers in the face of a price review by market players, experts in the lead! If you put everything in one shaker and you shake, you get a loss of orientation which leads to the waiting period that we are dealing with.

“We will have to learn to value the markets with a new grid of asset values”

But this doesn’t mean investors are losing interest in the markets, we still see plenty of cash available to invest, but certainly on revised terms. We are starting to see certain trends, but nothing decisive for the moment. On the other hand, the tertiary rental market in Île-de-France is doing very well with more than one million square meters covered and a year-to-date outlook of over two million. Some say it’s post-Covid catching up, which we agree with. In addition, we remain focused on the level of expressed demand, which remains dynamic regardless of the asset class considered. I carefully observe the demand expressed in SME SMI activity, as market reversals often take place there, but at the moment everything is going well all over France.

Our 40 offices in France allow us to take the pulse of what is happening throughout the territory, and this is confirmed in the tertiary sector. We hope that the slight shocks in the markets are due to inflation after the health crisis.

With regard to the office, are we starting to feel the effects of the massification of telecommuting in the tertiary market?

I am a big fan of the massification of tertiary poles and this will be enhanced by the use of telework in companies. I don’t think we can recreate piles tomorrow ex nihilo† In recent months I have opened myself to the market, to journalists, everyone knows my opinion on this. Today, it seems clear that assets that are far from transportation, in the suburbs, will face significant marketing difficulties. It’s hard to quantify, but we can estimate that there could easily be 3-5 million square feet of leased offices, which can raise questions. The real problem with these assets is their long-term future. If they are not in attractive locations, they will struggle to find buyers.

Is the transformation from offices to housing not possible for these areas?

Some communities of municipalities in Île-de-France will never accept such projects. So we will have to think about other options to write the future of these buildings. The topic is there, it’s up to us professionals to answer it!

“We must deploy the necessary instruments to move towards a ‘greening’ of society”

Want to say something about emerging asset classes? The life sciencesthem data centerthe live together

It is worth looking at each nomenclature individually. The life sciences experience an acceleration. The president of a renowned French design agency told me about the possibilities for industrial relocations. We are currently working on many industrial filings offering equipment intended for: life sciences

the live together stay tuned live together and is deployed in city center operations, well positioned and of limited size. I’m not saying it won’t develop, this is an answer to a specific social question, in the sense of the community. I don’t think we’ll ever see the birth of a 10,000 square foot operation, but what I appreciate is the mix, whether it’s urban or utility, because it helps to develop an intelligence collective, around the fact of bringing together these places people who can share common services. The community aspect, which in my opinion does not spontaneously acquire a negative meaning, is noticeable.

We are very active in data center and have set up a dedicated team in Paris. The problem lies in a thorny triptych: finding suitable land, connected to the electricity grid with the permission of the local authorities. They are essential to our economy, it is a real necessity, but their environmental impact makes them unattractive to communities.

Can you come back to the acquisition of Green Soluce and, more broadly, explain your ESG strategy?

When we started talking about sustainable development, we were talking about saving the planet, when in reality, as Ella Etienne-Denoy, president of Green Soluce, once pointed out, it’s about saving humanity. The debate about human attitudes needs to be adjusted, it is our own future that is at stake. The new generation has already appropriated the subject. We are the leaders, they are the actors. In any case, we must deploy the necessary instruments to move towards a “greening” of society. This is a paradigm shift, a fundamental reflection. I knew the two partners of Green Soluce and told them about my desire to take over their company. One of them asked me why, I answered him that it is the future, both for our social problems and for the real estate sector, which is absolutely not in order to act. It was a agreement important to us, as we have gone from a “sustainable development” team of 10 to 35 people, with a real desire to act. The aim is to bring our reflections to the real estate sector, which is lagging far behind in environmental terms. The problems are not taken into account today. With the taxonomy, the timetable that will accelerate, the tightening of regulations, the stakes are huge and we want to be exemplary.

“It is always complicated to sell services to someone who does not understand the interests”

How do you support commercial real estate players?

The real estate sector must act! To this end, we focus our campaign on four themes: some of our customers have no specific knowledge and feel powerless to act effectively. It is always complicated to sell services to someone who does not understand the interests. We are going to build a training to establish a productive dialogue between all actors. The second is to fully embrace the notions of CSR/ESG and to use advice and recommendations. Many see only the topic of energy, but it is also necessary to integrate the social aspect and the underlying issue of corporate governance. The third component is energy: we have to implement the RE2020 complex and our role lies in support, advice, reflection on a deployment plan, validation of the implementation and observation of its effects. Finally, the label part associated with buildings is already well integrated in our industry, covering construction, investment and occupancy, and now has been added digitally.

Maybe the real estate industry hasn’t gone from cynicism to goodwill yet?

I think there is a collective consciousness. Most major real estate companies have understood that action is needed, but implementing this will is difficult. She asks for a schedule execution and especially financing, and sometimes complex works when the site is occupied. The difficulty lies in the proper coordination of these various factors. Some will be in debt, others in arbitration, but the awareness is there.

Interview by Émile Le Scel and Alban Castres

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