Residential and “green” are the two main trends of the year ahead, experts agreed at Real Asset Media’s European Outlook 2021 – France investment briefing, which took place online this week.
“Residential in all its different forms is the future, there’s a real change in how people want to live,” said Etienne Dupuy, CEO, Nhood. “And green and sustainable is the new definition of quality.”
The green theme is developing fast, as regulators are dealing with climate change risk, tenants demand sustainable and healthy buildings in which to live and work and investors are coming to the conclusion that it is money well invested.
New schemes without an ESG element are unthinkable now, he said: “At Nhood we’re pushing the boundaries, re-inventing the city, creating mixed-use districts and putting nature in the mix, even urban farming.”
There is a lack of supply in every residential segment, from PRS to affordable housing, from student housing to senior living. The supply and demand mismatch is the reason even traditionally conservative lenders are looking favourably at the residential sector.
“Banks are cautious and tend to focus on the main sectors like office or logistics, but we’d really like to add residential, because there’s real momentum in the sector,” said Serge Bacconnier, deputy head Paris office, Berlin Hyp. “We’ll continue to lend and I am optimistic about Paris, it’s such a large and deep market and offers plenty of opportunities.”
One sector that is seeing huge growth in demand is senior housing.
“There’s a great need for senior housing development, especially in the big cities that lack capacity,” said Frédéric Dib, Mozaic Asset Management. “The shortage has deepened because many projects have slowed down during the pandemic. There may be a drop in volumes because of this, but the trend is definitely up. There will be a strong push in this sector.”
French investors are dominant in the senior housing sector, but foreign capital is beginning to show interest.
“We’re seeing many German and Scandinavian investors and also from the Middle East, which was a surprise, and Asia,” Dib said. “Part of the reason has been the need to diversify. A small shift from the large office market to senior housing makes a really big difference to our small sector.”
Investments in offices have decreased because capital wanted to diversify into different sectors.
“Logistics and residential have been favoured by institutions, but the problem is limited supply,” said Ken Baccam, director research and strategy, AEW. “But the Paris office market remains strong, ahead of not just London but also New York, Tokyo and Seoul. I am still a believer.”