ESG issues have come to the fore post-pandemic and this is changing the Paris market, delegates heard at Real Asset Media’s France Investment Briefing, which took place recently on the REALX.Global platform.
“The ESG aspect has become a priority in the last twelve months,” said Benjamin Cartier-Bresson, head of Paris office, Berlin Hyp. “We have to look at the future performance of an asset we are financing, and if the location is good and the property is ESG-compliant or can be made so with capex then we are in a safe haven.”
Another change has been the difficulties in demolishing existing buildings, which is leading to a sustainability-driven shift towards repurposing.
“We are financing conversions rather than new buildings and I am sure we’ll do more and more of that,” said Cartier-Bresson. “It’s a fabulous way to support the fight against climate change.”
The need to reposition and repurpose buildings, usually old office assets, has led to a willingness to diversify into other sectors.
“Asset repositioning reduces the carbon footprint and gives a second lease of life to buildings,” said Raphael Tréguier, founder and managing partner, Kareg Investment Management. “Every year 50 million sq m in Paris become obsolete. Around a third of that will be restructured as offices, because the office sector will stay strong, but the key question is what to do with the rest.”
More and more investors and lenders are waking up to the huge opportunity to turn existing buildings into something else, be it mixed-use, residential or logistics.
“Investors have changed their positions on asset classes and so have we,” said Cartier-Bresson. “We’ve started to finance resi in France, which is new for us, including operational resi like student housing and senior housing, which is a fast-growing sector.”
The focus on residential allows investors to look beyond Paris to France’s regional cities.
“We are very positive on the French market and outside the capital resi is a big focus for us,” said Simon Wallace, head of research, alternatives, Europe, DWS. “Long-term demographic plays mean there are interesting opportunities in build-to-rent in fast-growing cities like Toulouse or Bordeaux.”
Investors are looking beyond residential and financing requests are becoming more and more varied, said Cartier-Bresson: “Every other week we’re asked to finance an interesting life sciences project, or urban logistics, usually conversions from car parks. We’ve even been asked about lending pads for drones.”
As EU taxonomy is changing and evolving, lenders as well as investors and asset managers must keep up with developments.
“EU taxonomy will have a huge impact on our segment in the next five to ten years,” said Tréguier. “There’s been an important change in mindset, going beyond ‘do no harm’ to actually making a positive contribution. A lot of capital will be re-directed to funds that have a positive impact on the planet.”