‘Strong fundamentals are driving the real estate sector in France’

Renaud Jézéquel, Director General, Helaba

Strong economic fundamentals in France are having a positive impact on the real estate sector and there are no worries about oversupply or a sudden end to the cycle, Renaud Jézéquel, Director General, Helaba, told Real Estate Day. 

Investment volumes in commercial real estate are at the €32.5 bn mark, which is the second highest ever achieved, and there is still momentum in the market with the Grand Paris project and the Olympic Games coming up.

‘We all know we’re close to the end of the cycle, but I think there will be a gradual slowdown rather than a sudden crisis because the fundamentals of the French economy have improved’, he said. ‘The real estate market itself is strong. Supply is limited relative to take-up and, looking at future supply, 40% is already pre-let so the risks of seeing oversupply, empty buildings and lower rents are extremely limited’. 

The backdrop is one of stability and reforms, which bodes well for the future. ‘There is positive growth at a reasonable pace rather than exuberance, which I think is good,’ Jézéquel said. ‘We need to be diligent and vigilant and aware of global risks, but the French government has been making good progress, implementing strong reforms and paving the way for success for the country, for its companies, for the real estate market overall and for its lenders as well’.

In such a positive context Helaba has taken a less defensive approach recently. ‘This past year the ratio of core and core plus relative to value-add development was 60/40, while historically it has tended to be about 80/20 so 80% of investment volume was core and core plus and 20% was value add development,’ he said. 

More and more investors are now taking selective risk on new destinations around Grand Paris, especially in the office sector, but Helaba was ahead of the curve. ‘For the past five years we have taken selective positions on development financing and on spec developments with great success,’ Jézéquel said. 

Now that everyone is piling in, though, Helaba is taking a pause. ‘I would not call it a step back, but we will have a more cautious approach towards value-add and development ,’ he said. ‘But going forward it is clear that the opportunities are in the riskier positions’.The same caution is stopping the bank from following other institutions into the increasingly popular alternative or niche asset classes like student housing, retirement homes and co-working. ‘We do see the interest in our clients but we are not ourselves active in that space yet,’ Jézéquel said. ‘We are taking a very thorough look at the trend and we are thinking about how to position ourselves but at Helaba, being a balance sheet commercial traditional lender working closely with the Germans Sparkassen, we tend to have a relatively conservative approach and we want to make sure that before we jump into a new asset class we really know what we are getting into’.

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