SCPI and office property: a winning combination?
Despite the democratization of telecommuting, the attractiveness of office real estate compared to other real estate asset classes has remained intact, in terms of risk and volatility.1
Primopierre, which is mainly invested in office real estate, has demonstrated its resilience and has placed its assets at the heart of a sustainable approach.
The government has just announced that the number of days of telework should be negotiated within companies as of June 9, but that there is no question of going to "all-telework". The adoption of hybrid work, which is also in line with workers' wishes. According to the Odoxa survey, conducted for BFM Business, 74%2 of them say they want to go back to their office from time to time.
Although it has its advantages, remote work does not negate the need for shared workspaces, at a time when, more than ever, companies are seen as places of exchange, learning and emulation.
This reality explains, among other things, the resilience of office real estate. The crisis has reinforced certain basic trends in commercial real estate investment: so-called "core" real estate, which is not very volatile, is more popular than ever, thanks to its buildings located in attractive areas, with no significant work to be done, and long-term leases with quality tenants.
On the other hand, the crisis has also accelerated the transition already begun by many large companies, which are switching to flexible offices; a segment of the corporate real estate market made up of shared work spaces, coworking and facility management solutions.
Primopierre SCPI, a proven resilience during the health crisis
Since 2008, the SCPI Primopierre has been managed by the Management Company Primonial REIM. With a capitalization of over 3 billion euros3, it is one of the largest French SCPIs. With a real estate portfolio consisting mainly of assets located in Paris and the inner suburbs, Primopierre invests mainly in office property, which remains the preferred asset class of European real estate investors. With a performance of 5.045 6 in 2020, the SCPI Primopierre has managed to keep the bar high7, in a very competitive market, thanks to a wise investment strategy reflecting the convictions of its management team.
An agile investment strategy
The success of SCPIs can be summarized according to three golden rules: the relevance of investment choices8, the quality of the management of the real estate assets, and the agility of the team to adapt to market changes. Because Paris and the inner suburbs are in high demand for commercial real estate, SCPI Primopierre is pursuing its investment strategy in these areas (quality of location, buildings and tenants) in parallel with the work being done on its assets to improve the environmental performance of its buildings.
An SRI-labeled SCPI
On December 22, 2020, the SCPI Primopierre received the SRI label dedicated to real estate funds. A label created and supported by the public authorities, which allows investors to identify savings products that participate in the development of a sustainable economy. Primonial REIM's SRI approach is a long-term process of progress through the application of environmental, social and governance (ESG) criteria to the management of assets held by its SRI-labeled funds.
Given the weight of existing properties compared to new ones in the real estate market (around 98% versus 2%), the first priority is to improve existing assets, which is what Primopierre is focusing on. Primonial REIM has developed an ESG rating grid for its assets. This grid has 90 indicators grouped into 7 themes (Integration of the building into its territory, Integration of environmental risks, Qualities specific to the building, Technical management of the building, Services to occupants, Flexibility of spaces and buildings, Relations between stakeholders).
A label for the future, at a time when more and more investors, aware of ESG issues, say they are ready to invest in funds with a responsible approach. Primonial REIM is convinced that real estate assets that are part of an SRI approach will be more liquid and better valued over time. From now on, financial performance can be combined with environmental and social performance over the long term.
1 European real estate investments: 1st half of 2021, Primonial REIM Research Department
2 Survey conducted from February 3 to 11 by Internet with a sample of 2,010 French people representative of the population (quota method), including 444 teleworkers and 811 relatives of teleworkers.
3 Source: Primonial REIM as of June 30, 2021
4 Source: CBRE 2021 EMEA Investor Intentions Survey conducted between December 2, 2020 and January 19, 2021
5 Source : Primonial REIM. Past performance is not indicative of future performance. Past investments are not a guide to future investments.
6 Rates of return are measured here by the distribution rate on market value (TDVM). The distribution rate on the market value of the SCPI is the division of the gross dividend before withholding tax paid in respect of year N (including exceptional interim dividends and share of distributed capital gains) by the weighted average unit price of year N.
7 According to the IEIF, the average TDVM of SCPIs on 31/12/20 is 4.18%.
8 Past investments are not indicative of future investments.