Is the investment in stone going against the wall?

For the more than four million French savers who invest in real estate via collective investments, the year 2023 was dark.

The slowdown in the real estate market then the drop in prices observed in 2023 caused a “shock wave” which spread to these investments, starting with real estate investment companies (SCPI), summarizes the broker Linxea in its barometer annual.

For a year, SCPIs have been forced to reduce the value of the properties they hold due to market conditions, whether they consist of housing, warehouses or offices.

As a result, major players in the ecosystem have revised downward the value of the shares they hold in SCPIs, with falls of up to 20% in one or two times. In March, this was particularly the case for three SCPIs offered by the leading European asset manager Amundi, which represent nearly 8% of market assets, or even an investment by the BNP Paribas bank.

Twenty-six SCPIs out of more than 200 in France lowered the price of their shares between March 2023 and 2024, but "these depreciations still represent 35% of the total capitalization" of the market, estimated at 90 billion euros at the end 2023, according to George Nemes, the president of Patrimmofi.

Thwarted escape

However, revaluation of property values ​​is only one way to make money with SCPIs. The other is the “returned return”, the result of the rental of properties, which ensured remuneration of 4,52% in 2023, according to the French Association of Real Estate Investment Companies (Aspim), a stable proportion compared to 2022.

“Recent decades have shown that heritage is valued over time,” underlines the president of Aspim Jean-Marc Coly, further noting that certain SPCIs specializing in sectors “such as health, old age or logistics” have “performed well” during this period.

In 2023, savers trying to get their money back may have been disappointed: investing in these real estate funds is less liquid, meaning it is more difficult to transact than other financial assets, such as actions. Many sales of SCPI shares did not find buyers in 2023, and as of December 31, 2023, this concerned one in two SCPIs, according to Aspim.

A management company “may not be able to respond to redemption requests for several months,” recalled in February the mediator of the Financial Markets Authority, which regulates this type of investment.

The AMF also sent a letter in September 2023 to ask players in the sector to ensure transparency on the valuation of funds.

Renovation

The managers now hope that the low point in valuations has been reached, thanks to the recovery of the real estate market. The restart is foreseen with the interest rate cuts which could begin by the summer for the European Central Bank.

New players are trying to take advantage of this situation: in 2023, eight new SCPIs will be created. Some stand out by offering very low entry fees.

Another advantage of these newcomers is that "most old SCPIs, with an old heritage, have a dual problem: energy efficiency and bringing offices up to standard in relation to the demands for comfortable living of employees", recalls Cyrille Chariter-Kastler, from Facts & Figures. They must therefore agree to major renovation work.

“Real estate is a cyclical sector of activity (...) and we think that the first months of 2024 mark the end of the bearish cycle,” explains Foulques de Sainte-Marie, fund director at Mata Capital, to AFP , which is launching an SCPI in 2024.

“A premium office in Paris was trading for 35.000 euros per square meter at the end of 2021, it is now around 20-22.000,” he reports. “It’s the right time” to invest, he assures.