Real estate is struggling to regain its attractiveness, and investors are beginning to lose patience.
Two barometers remind us that players are feeling the pinch. In France, the MSCI and BPCE Solutions immobilières barometer reveals that 35% of investors are even considering reducing their real estate allocation this year. The same is true at European level, where Inrev reports a drop in the investor confidence indicator for the second quarter in a row.
The macroeconomic and geopolitical context is obviously weighing on morale. One might have thought that real estate could be an island of stability in a business world that has become volatile, even chaotic since the start of the trade war. Especially since the figures are improving. In its latest note, Inrev reminds us that real estate investment is performing well overall. Even offices, that hated asset, are returning to profitability after half-years of negative returns.
Unfortunately, there does seem to be a certain disconnect between investor confidence and asset performance in Europe. The same is true in France. And this is reflected in investment volumes, which are struggling to take off again.
What would it take to move from a quiver to a rebound? Quite simply, the rebuilding of a solid risk premium for real estate. There are two possible ways of doing this.
One is through interest rates. Despite slightly more accommodating central bank policies, long rates are still at stratospheric levels for investors who bought in the previous cycle. The FED's status quo decision and Christine Lagarde's talk of an imminent end to the European Central Bank's monetary easing leave little hope for the last remaining supporters of a drastic cut in key rates.
The other way is through prices. As long as the environment remains unchanged, there is no end in sight to the decline in values, with the possible exception of "prime". This means that, in an increasingly fragmented market, we must carefully select today what will remain "prime" tomorrow.