© Philippe Matsas
The expansion of the real-estate activities of Primonial has been staggering in recent years. The company’s directors give us their thoughts on how 2019 will go.
Leaders League. What are your predictions for the real-estate market in 2019?
Laurent Fléchet. We are not worried, because the latest noises coming out of the European Central Bank suggest interest rates will remain at their current level. The risk premium in favor of real estate remains quite high and continues to prove enticing for investors. A large number of investors remain interested in the continent ‒ despite the uncertainty surrounding Brexit ‒ in particular in Germany and France where Primonial is particularly active. One final point: Primonial is in lockstep with developments in the market.
The ideal portfolio for an investor is one that is diversified, with a demographic spread of shares, according to the latest research made available by the L’Institut de l’épargne immoblière. At the end of 2018 we managed assets consisting of offices (53%), healthcare properties (33%) and the rest made up of retail property spread around Europe. In the next five years our objective is to have a portfolio of one-third offices, one-third healthcare property, 20% to 25% residential and the 10% retail property.
Grégory Frapet. We are equally bullish when it comes to the French property market. Other than the topics broached by Laurent, I would cite the development of the Grand Paris project, which is going to lead to remarkable value creation in the property market. On top of that, the rental market is doing wonderfully, notably in the central business district, where rental values have gone up considerably.
What markets will Primonial be active in in 2019?
L.F. We have dedicated teams in France, Germany, Belgium, and will soon have one in Italy as well. Each team decides its own roadmap. In Germany, for example, the team has decided to invest in the residential and healthcare sectors, given our knowledge of these two sectors, in partnership with AviaRent, and the depth of the German market. In Belgium, the teams at Codabel AM are focusing on retail property, while continuing to look for residential property opportunities, in line with the first investment we made in Belgium in partnership with Brussels-based Aedifica.
In Italy we are pursuing our acquisition strategy in the healthcare, residential and retail property sectors with our new local team. And let’s not forget Luxembourg, a country where our pan-European real-estate platform is based and where we invest in housing, via our value-added funds.
And what about France?
G.F. We will continue to follow our office-property acquisition strategy in established and upcoming markets, while continuing to rely on our fundamentals. We might also bet on the rental market or on properties in need of restructuring in order to create value. At the same time, we might well sell some of our mature properties. Our investment strategy in France will be impacted by Primonial’s diversification strategy outlined above. We are very interested in the healthcare sector, and are searching for partnerships with major operators. As regards residential property, it is on our radar because the rate of returns is close to that of prime office space and we see values continuing to go up in certain locations. The other advantage with rental is it offers more liquidity should the market take a turn for the worse.
Last but not least, Primonial has an opportunistic approach when it comes to retail property. We are focusing on high street retail opportunities and those in well-established retail parks.