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Letter from Stéphanie Lacroix
March 2022

Stéphanie Lacroix After a year of unprecedented health crisis in 2020, 2021 was, as expected, the year of the mechanical rebound of growth in Europe with a growth of 5.2%, thanks to the gradual lifting of the containment measures. In 2022, economic activity in the euro zone is expected to expand by 4.3% (source: OECD). In France, the continuation of policies to support the economy, both fiscally and monetarily, has borne fruit (growth of over 7%).*, unemployment contained or even falling, business failures below pre-pandemic levels).

This rebound in activity can be measured in terms of real estate investment volumes, with 175 billion euros invested over nine months in 2021 (+7% over one year)** in the euro zone, the European commercial real estate market is once again on the rise.

The movement of real estate investors has been twofold: on the one hand, a "flight to quality", with a refocusing of investments on prime office space; on the other hand, an increase in the allocation to "alternative" asset classes (healthcare, laboratories, logistics) and to residential real estate, which has seen an increase in its value in almost all European cities.

After 2021, the year of the rebound, 2022 promises to be the year of transitions:

  • Towards a sanitary normalcy. From a strictly economic point of view, the drops in activity (and consequently the abandonment/renegotiation of rents) were only observed for the period of March-April 2020, after which activity stabilized despite the restrictions. Companies have learned to "live with the virus": telecommuting and rearranging office space, click-and-collect for businesses, etc.
  • Towards monetary and fiscal normalcy, with the necessarily gradual end of "whatever it takes". Inflation, driven by rising raw material costs and pressure on inventories, remains a point of vigilance. According to the European Central Bank, the increase in key rates should remain limited.
  • Towards the evolution of uses. The next real estate decisions of users will integrate the technological leaps made during the pandemic, with offices evolving towards more services, more flexibility, more adaptation to employee mobility. Similarly, retail outlets should see the development of new payment technologies, clinics tele-medicine, etc.
  • Towards a decarbonized real estate. The wave of successive regulations (Tertiary Decree, European Climate Law, SFDR, Taxonomy...) and the demand from the public and institutional investors have caused the real estate sector to take environmental and social issues into account more systematically, as shown by the success of the Real Estate SRI Label.

In this context, active management is more than ever on the agenda for all our SCPIs. It translates into :

  • a balanced allocation between cyclical (office/retail) and acyclical (healthcare, residential) assets;
  • More frequent arbitrage of mature assets;
  • seizing opportunities in sectors that experienced significant discounts following the health crisis (hotels, retail parks)
  • the continuation of the strategic choices made several years ago that have enabled Primonial REIM France's SCPIs to remain resilient in 2020 and 2021, i.e. the acquisition of core assets rather than opportunistic ones, geographic diversification (France, Europe) targeted by property type, a high degree of selectivity in the investments made (quality of locations, buildings and tenants), and the taking into account of environmental, social and governance standards (ESG)

The year 2022 will be marked by the acceleration of the deployment of the ESG strategy throughout our real estate portfolio. Thus, the SCPI Primovie, invested in health and education real estate, obtained the SRI label on January 28, 2022. With this certification, which follows those of the SCPI Primopierre and the OPCI PREIM SRI a year ago, our portfolio "under SRI management" represents nearly 43% of the assets under management by Primonial REIM France and 88% of the capitalization of our SCPIs, i.e., one of the largest assets under SRI management in the French market.

The reinforcement of active management combined with a conviction-based allocation will enable us to achieve the following performance objectives for our SCPIs in 2022, for the benefit of their unitholders***.

I thank you for your confidence and wish you -while there is still time- my best wishes for this new year.

Stéphanie Lacroix, Managing Director of Primonial REIM


*Source INSEE
**Source Primonial REIM Research and Strategy
***Past performance is not indicative of future performance. Performance is not guaranteed..