The pandemic has accelerated the development of teleworking and e-commerce and emptied stores and offices.
Times are tough for listed real estate companies, these companies which live off the rent from their assets. The closure of stores for many months, the bankruptcies of certain brands and the generalization of teleworking have sent them to the ground.
The sector was one of the most heavily sanctioned on the stock market with the health crisis. Between the beginning of March and the end of October, the Euronext FIEF SIC France index, which brings together the large real estate companies listed in Paris, lost more than half of its value.
It went from just over 3,000 points to around 1,500 points. With the end of the suspense over the American presidential election and the encouraging news on the anti-Covid vaccine front, it regained a little more than 30% in one month. Insufficient, however, to erase the stigma of the crisis. Since the start of the year, it has still lost more than 27%.
For specialists at the Swiss bank Mirabaud, the health crisis has acted as an accelerator for teleworking and online commerce. For them, habits are now established: they correspond to underlying trends and it is difficult to envisage going back. With the confinements, mentalities have evolved considerably: “Medef, which has long been reluctant, is now a driving force on the issue of teleworking in companies” estimates John Plassard, investment advisor at Mirabaud.
Employers and unions (with the exception of the CGT) even reached a national agreement on the subject on Thursday. According to a survey carried out by the IT company Maria DB Corporation, 50% of French companies make the deployment of permanent teleworking strategies a priority. “Office real estate companies no longer have a choice, they will have to adapt and offer offers compatible with this new way of working” estimates Laurent Saint Aubin, European real estate manager at Sofidy (real estate fund management company). “The offer will have to move towards hubs, platforms capable of meeting the needs of these nomadic employees,” adds John Plassard.
Sling at URW
For shopping center owners, the other challenge, already present before the health crisis, is to find answers to the breakthrough of e-commerce. “In Britain, online shopping now has a market share of 29%. This is 10 points more than a year ago, a phenomenal development,” underlines Laurent Saint Aubin, at Sofidy. A trend that is confirmed all over the world. In China, internet sales already represent “a quarter of spending on consumer products,” according to market research specialist Kantar.
The large French real estate companies, which are very present in shopping centers and offices, have particularly suffered this year on the stock market. The case of the European number in the sector, the French Unibail Rodmaco Westfield (URW), which had developed at a rapid pace in shopping centers, with the purchase for just over 20 billion in 2018 of British, and especially American, assets, from the Australian Westfield, is emblematic. In a tight financial situation, URW wanted to tap the market in the fall. Its stock price had collapsed.
It went from around 140 euros at the start of the year to less than 30 euros during October. Telecoms magnate Xavier Niel and Léon Bressler, former boss of Unibail, have launched a counter-project. This rebellion resulted on November 9 in the ousting of the management and the establishment of a new team responsible for turning the page on the American adventure. Since then, the stock has rebounded strongly, but it has still lost more than 55% since the start of the year.
The other large real estate companies listed in Paris are not spared. Klepierre, very present in shopping centers, and Mercialys, the historic real estate company of the Casino group, sold around 40%. Gecina, whose assets are mainly made up of offices and housing, limits the damage somewhat with a decline of less than 20%. Analysts today largely favor real estate companies specializing in housing such as the German giants Deutsche Wohnen or Vonovia, which have weathered the storm much better, but also specialists in warehouses and logistics who are benefiting from the development of online commerce, with in particular the English Segro or the French Argan.
The latter posted an increase of more than 50% in its recurring net profit in the first half. Its stock is up more than 7% since the start of the year and its value has more than doubled in three years. Laurent Saint Aubin, at Sofidy, also positions itself in niches, with for example SBB, a Swedish real estate company dedicated to public services (schools, etc.) or technological real estate companies which house telecom towers and “data centers”, such as the American Equinix or the European Cellnex, for which the future seems bright.