Article
Toward a return of occupiers to the commercial real estate market?
March 15, 2023
In a context marked by upheavals and readjustments that leading to new balances, one subject is beginning to fuel debate: the theoretical return of occupiers to the acquisition of their buildings.
In recent months, in response to the prevailing uncertainty, the conditions for financing and granting credit have been greatly tightened. Banks are becoming more cautious and are putting their customers' solvency at the heart of their lending policies. At the same time, to curb rampant inflation, the ECB has revised its key interest rates once again (and probably not for the last time), squeezing banks' margins even further. As a results: the dialogue between stakeholders is taking longer, transactions are being rebalanced and sometimes, unfortunately, postponed or even aborted.
In this context, Industrial and Logistics users would be able to adopt an asset-based approach to their real estate. Less dependent on macro-economic and financial uncertainties, the current window of opportunity is favorable to them. Decisions take less time to be made and the productive fabric is currently a secure guarantee for banks that are more inclined to finance operators whose economic health and the sustainability of their activity is rapidly (and highly) proven.
This desire for acquisition is becoming more widespread but is mainly expressed by SMEs/SMIs rather than by large groups, which prefer to outsource their assets to maintain their agility via commercial leases and reinvest directly in their production system.
Nevertheless, investors continue to structurally dominate the market: vacant space, speculative schemes and Ready to start programs as of end of December is mainly available for lease (89% of the logistics supply in France / 76% for industrial assets in the Paris region), in line with the trend observed in recent years. However, even if a reversal of this trend is difficult to predict, some administrative authorities are now making the granting of building permits conditional on the proposal of acquisition solutions for occupiers.
This issue has not finished being discussed and identifies a new link among many others that is transforming and changing real estate landscapes towards new paradigms. If the figures do not yet confirm the return of users and the beginning of this trend is still in its infancy, it will be interesting to make a first assessment in a few months.
In recent months, in response to the prevailing uncertainty, the conditions for financing and granting credit have been greatly tightened. Banks are becoming more cautious and are putting their customers' solvency at the heart of their lending policies. At the same time, to curb rampant inflation, the ECB has revised its key interest rates once again (and probably not for the last time), squeezing banks' margins even further. As a results: the dialogue between stakeholders is taking longer, transactions are being rebalanced and sometimes, unfortunately, postponed or even aborted.
In this context, Industrial and Logistics users would be able to adopt an asset-based approach to their real estate. Less dependent on macro-economic and financial uncertainties, the current window of opportunity is favorable to them. Decisions take less time to be made and the productive fabric is currently a secure guarantee for banks that are more inclined to finance operators whose economic health and the sustainability of their activity is rapidly (and highly) proven.
This desire for acquisition is becoming more widespread but is mainly expressed by SMEs/SMIs rather than by large groups, which prefer to outsource their assets to maintain their agility via commercial leases and reinvest directly in their production system.
Nevertheless, investors continue to structurally dominate the market: vacant space, speculative schemes and Ready to start programs as of end of December is mainly available for lease (89% of the logistics supply in France / 76% for industrial assets in the Paris region), in line with the trend observed in recent years. However, even if a reversal of this trend is difficult to predict, some administrative authorities are now making the granting of building permits conditional on the proposal of acquisition solutions for occupiers.
This issue has not finished being discussed and identifies a new link among many others that is transforming and changing real estate landscapes towards new paradigms. If the figures do not yet confirm the return of users and the beginning of this trend is still in its infancy, it will be interesting to make a first assessment in a few months.