Nouvel enregistrement 26

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S… Speaker 2 (Nouvel enregistrement 26)

time sorry um yeah it's always next time yeah no problem no worries

0:04

S… Speaker 1 (Nouvel enregistrement 26)

at all and i'm always happy to um give you an update give you the the 30 000

0:08

S… Speaker 1 (Nouvel enregistrement 26)

foot view another time on that on that meeting i thought it was actually quite good it was good um

0:12

S… Speaker 1 (Nouvel enregistrement 26)

a wide -ranging discussion and um yeah it's a shame you couldn't be there but i'm

0:16

S… Speaker 2 (Nouvel enregistrement 26)

always happy to um to talk about anything all right uh well maybe

0:20

S… Speaker 2 (Nouvel enregistrement 26)

a little bit of context and we get straight into it because uh i already kept

0:24

S… Speaker 2 (Nouvel enregistrement 26)

you waiting long enough uh uh

0:28

S… Speaker 2 (Nouvel enregistrement 26)

We've been seeing a lot of office bashing,

0:31

S… Speaker 2 (Nouvel enregistrement 26)

at least in France at the moment.

0:33

S… Speaker 2 (Nouvel enregistrement 26)

And we wanted to,

0:36

S… Speaker 2 (Nouvel enregistrement 26)

you know,

0:37

S… Speaker 2 (Nouvel enregistrement 26)

we don't want to be blind to the issues that are going on with the

0:41

S… Speaker 2 (Nouvel enregistrement 26)

asset class.

0:42

S… Speaker 2 (Nouvel enregistrement 26)

But we also see a lot of investors that tell us they are still

0:47

S… Speaker 2 (Nouvel enregistrement 26)

looking for offices.

0:48

S… Speaker 2 (Nouvel enregistrement 26)

We still see...

0:53

S… Speaker 2 (Nouvel enregistrement 26)

appetite for the sector.

0:55

S… Speaker 2 (Nouvel enregistrement 26)

So therefore,

0:57

S… Speaker 2 (Nouvel enregistrement 26)

the next magazine will be 10 reasons to still believe

1:01

S… Speaker 2 (Nouvel enregistrement 26)

in offices,

1:02

S… Speaker 2 (Nouvel enregistrement 26)

which is,

1:04

S… Speaker 2 (Nouvel enregistrement 26)

you know, kind of the counterpoint to the overall discourse

1:08

S… Speaker 2 (Nouvel enregistrement 26)

at the moment.

1:09

S… Speaker 2 (Nouvel enregistrement 26)

And therefore,

1:10

S… Speaker 2 (Nouvel enregistrement 26)

I was happy to talk with you because I wanted a more

1:15

S… Speaker 2 (Nouvel enregistrement 26)

outside view because we talk a lot with French investors

1:19

S… Speaker 2 (Nouvel enregistrement 26)

at the moment and because,

1:20

S… Speaker 2 (Nouvel enregistrement 26)

you know, to have the

1:22

S… Speaker 2 (Nouvel enregistrement 26)

the view of anglo-saxon

1:29

S… Speaker 2 (Nouvel enregistrement 26)

That's why I was really looking forward to meet you yesterday.

1:33

S… Speaker 2 (Nouvel enregistrement 26)

I'm happy that I'm able to do it now.

1:35

S… Speaker 2 (Nouvel enregistrement 26)

Maybe to start,

1:37

S… Speaker 2 (Nouvel enregistrement 26)

what do you see?

1:39

S… Speaker 2 (Nouvel enregistrement 26)

How do you assess the asset class in Europe

1:43

S… Speaker 2 (Nouvel enregistrement 26)

in general?

1:44

S… Speaker 2 (Nouvel enregistrement 26)

Well,

1:45

S… Speaker 2 (Nouvel enregistrement 26)

obviously, I'm curious to know if France differs from

1:50

S… Speaker 2 (Nouvel enregistrement 26)

the rest of Europe in your eye.

1:51

S… Speaker 2 (Nouvel enregistrement 26)

But what's the assessment you can make as an analyst on

1:56

S… Speaker 2 (Nouvel enregistrement 26)

the sector at the moment?

1:59

S… Speaker 1 (Nouvel enregistrement 26)

I think we can start globally,

2:01

S… Speaker 1 (Nouvel enregistrement 26)

to be honest.

2:02

S… Speaker 1 (Nouvel enregistrement 26)

We're more

2:06

S… Speaker 1 (Nouvel enregistrement 26)

positive on offices than we have been for six years.

2:09

S… Speaker 1 (Nouvel enregistrement 26)

Obviously,

2:12

S… Speaker 1 (Nouvel enregistrement 26)

the game changed back in the pandemic completely,

2:16

S… Speaker 1 (Nouvel enregistrement 26)

where there's unbelievable polarisation between core and secondary.

2:21

S… Speaker 1 (Nouvel enregistrement 26)

And I think that that story will continue to play

2:25

S… Speaker 1 (Nouvel enregistrement 26)

out in perpetuity,

2:27

S… Speaker 1 (Nouvel enregistrement 26)

really, with investors continuing to assess risk in

2:32

S… Speaker 1 (Nouvel enregistrement 26)

offices with a much more granular and detailed

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S… Speaker 1 (Nouvel enregistrement 26)

lens.

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S… Speaker 1 (Nouvel enregistrement 26)

But we are seeing the market fundamentals

2:41

S… Speaker 1 (Nouvel enregistrement 26)

improve in the likes of New York,

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S… Speaker 1 (Nouvel enregistrement 26)

where we've had very little development.

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S… Speaker 1 (Nouvel enregistrement 26)

We've also got new sources of demand coming from the big tech companies

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S… Speaker 1 (Nouvel enregistrement 26)

who have seen significant growth over the last couple

2:54

S… Speaker 1 (Nouvel enregistrement 26)

of years.

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S… Speaker 1 (Nouvel enregistrement 26)

The MAG7 now account for 35 %

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S… Speaker 1 (Nouvel enregistrement 26)

of the S &P 500,

3:00

S… Speaker 1 (Nouvel enregistrement 26)

for example,

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S… Speaker 1 (Nouvel enregistrement 26)

and even larger.

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S… Speaker 1 (Nouvel enregistrement 26)

shares of tech companies in other global stock markets like in Korea

3:08

S… Speaker 1 (Nouvel enregistrement 26)

and Singapore,

3:08

S… Speaker 1 (Nouvel enregistrement 26)

etc.

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S… Speaker 1 (Nouvel enregistrement 26)

And those companies need somewhere to be based,

3:12

S… Speaker 1 (Nouvel enregistrement 26)

right? They need office space to run their companies from.

3:15

S… Speaker 1 (Nouvel enregistrement 26)

So yes, they need data centers,

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S… Speaker 1 (Nouvel enregistrement 26)

but they also need offices.

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S… Speaker 1 (Nouvel enregistrement 26)

And so we're seeing new sorts of demand through technological advance,

3:20

S… Speaker 1 (Nouvel enregistrement 26)

technological transformation,

3:22

S… Speaker 1 (Nouvel enregistrement 26)

I should say.

3:23

S… Speaker 1 (Nouvel enregistrement 26)

So the market is always dynamic.

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S… Speaker 1 (Nouvel enregistrement 26)

The supply situation changes.

3:27

S… Speaker 1 (Nouvel enregistrement 26)

The demand side changes.

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S… Speaker 1 (Nouvel enregistrement 26)

What people need from offices changes.

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S… Speaker 1 (Nouvel enregistrement 26)

So it's always good.

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S… Speaker 1 (Nouvel enregistrement 26)

It's always dynamic.

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S… Speaker 1 (Nouvel enregistrement 26)

But at the same time,

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S… Speaker 1 (Nouvel enregistrement 26)

we're always going to need offices.

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S… Speaker 1 (Nouvel enregistrement 26)

We don't think AI is going to take all the jobs.

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S… Speaker 1 (Nouvel enregistrement 26)

And even if it does take some of them,

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S… Speaker 1 (Nouvel enregistrement 26)

new jobs will be created.

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S… Speaker 1 (Nouvel enregistrement 26)

And if we end up with too much supply,

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S… Speaker 1 (Nouvel enregistrement 26)

we'll stop building.

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S… Speaker 1 (Nouvel enregistrement 26)

And some of those obviously secondary offices will come out of the market and

3:53

S… Speaker 1 (Nouvel enregistrement 26)

we'll get to a new equilibrium level where offices make sense again.

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S… Speaker 1 (Nouvel enregistrement 26)

And we've been through a period of that for the last six years.

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S… Speaker 1 (Nouvel enregistrement 26)

And we've been through it before in Amsterdam in

4:02

S… Speaker 1 (Nouvel enregistrement 26)

the early 2000s where they overbuilt.

4:04

S… Speaker 1 (Nouvel enregistrement 26)

We've been through it in Dublin where they overbuilt.

4:06

S… Speaker 1 (Nouvel enregistrement 26)

But eventually you get back to a normal level

4:10

S… Speaker 1 (Nouvel enregistrement 26)

of equilibrium amounts of office space where rents can start rising again.

4:15

S… Speaker 1 (Nouvel enregistrement 26)

So our view is that offices continue

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S… Speaker 1 (Nouvel enregistrement 26)

to have a role to play in real estate portfolios.

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S… Speaker 1 (Nouvel enregistrement 26)

And actually,

4:25

S… Speaker 1 (Nouvel enregistrement 26)

I guess the nuance today is that there are now...

4:29

S… Speaker 1 (Nouvel enregistrement 26)

more,

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S… Speaker 1 (Nouvel enregistrement 26)

a wider range of opportunities.

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S… Speaker 1 (Nouvel enregistrement 26)

So for the last six years,

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S… Speaker 1 (Nouvel enregistrement 26)

we've just seen core being the big core,

4:36

S… Speaker 1 (Nouvel enregistrement 26)

right? So core,

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S… Speaker 1 (Nouvel enregistrement 26)

prime,

4:38

S… Speaker 1 (Nouvel enregistrement 26)

ESG compliant offices and CBD locations,

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S… Speaker 1 (Nouvel enregistrement 26)

that's been the place to be.

4:43

S… Speaker 1 (Nouvel enregistrement 26)

Secondary and obsolete offices obviously have been out of

4:47

S… Speaker 1 (Nouvel enregistrement 26)

the question.

4:47

S… Speaker 1 (Nouvel enregistrement 26)

And so those core offices and those core strategies have made most

4:51

S… Speaker 1 (Nouvel enregistrement 26)

sense.

4:52

S… Speaker 1 (Nouvel enregistrement 26)

But now secondary pricing has started to move more.

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S… Speaker 1 (Nouvel enregistrement 26)

And we've seen...

5:00

S… Speaker 1 (Nouvel enregistrement 26)

investors and landlords and secondary offices have to take bigger haircuts and

5:04

S… Speaker 1 (Nouvel enregistrement 26)

be more willing to take big haircuts to make value -add strategies work.

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S… Speaker 1 (Nouvel enregistrement 26)

There's more interesting opportunities.

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S… Speaker 1 (Nouvel enregistrement 26)

So whether you're a core strategy looking for core offices in good

5:13

S… Speaker 1 (Nouvel enregistrement 26)

locations, we think that still works.

5:15

S… Speaker 1 (Nouvel enregistrement 26)

If you are a strategy that needs higher returns,

5:19

S… Speaker 1 (Nouvel enregistrement 26)

there are more opportunities to capture

5:23

S… Speaker 1 (Nouvel enregistrement 26)

that through your offices.

5:27

S… Speaker 1 (Nouvel enregistrement 26)

We think that there's still significant repricing that needs

5:31

S… Speaker 1 (Nouvel enregistrement 26)

to come in some parts of the market.

5:33

S… Speaker 1 (Nouvel enregistrement 26)

And I think some landlords,

5:35

S… Speaker 1 (Nouvel enregistrement 26)

secondary offices or peripheral offices still in denial about where value should

5:39

S… Speaker 1 (Nouvel enregistrement 26)

be.

5:40

S… Speaker 1 (Nouvel enregistrement 26)

So we still think that there's pain to come

5:44

S… Speaker 1 (Nouvel enregistrement 26)

and the market has not efficiently fully repriced those assets.

5:47

S… Speaker 1 (Nouvel enregistrement 26)

But they are,

5:51

S… Speaker 1 (Nouvel enregistrement 26)

is gradually happening.

5:53

S… Speaker 1 (Nouvel enregistrement 26)

We see transactions falling out of bed in the

5:57

S… Speaker 1 (Nouvel enregistrement 26)

UK and in Germany and in Frankfurt.

5:59

S… Speaker 1 (Nouvel enregistrement 26)

And where that happens,

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S… Speaker 1 (Nouvel enregistrement 26)

you get a repricing and then you find where the value really lies.

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S… Speaker 1 (Nouvel enregistrement 26)

Because to close that deal,

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S… Speaker 1 (Nouvel enregistrement 26)

to transact,

6:08

S… Speaker 1 (Nouvel enregistrement 26)

we get to a new price.

6:10

S… Speaker 1 (Nouvel enregistrement 26)

And so it is happening gradually.

6:15

S… Speaker 2 (Nouvel enregistrement 26)

and that's that's really interesting because one of the points we've

6:20

S… Speaker 2 (Nouvel enregistrement 26)

been trying to monitor is we we heard

6:24

S… Speaker 2 (Nouvel enregistrement 26)

from different investors over the last few weeks and months that they

6:28

S… Speaker 2 (Nouvel enregistrement 26)

were looking for they were expecting sorry opportunities

6:33

S… Speaker 2 (Nouvel enregistrement 26)

and you know maybe coming from distressed

6:37

S… Speaker 2 (Nouvel enregistrement 26)

sellers or

6:39

S… Speaker 2 (Nouvel enregistrement 26)

or things of that nature,

6:41

S… Speaker 2 (Nouvel enregistrement 26)

or maybe impressed sellers or more motivated sellers

6:45

S… Speaker 2 (Nouvel enregistrement 26)

would be a better way to put it.

6:48

S… Speaker 2 (Nouvel enregistrement 26)

Is that something that you're starting

6:53

S… Speaker 2 (Nouvel enregistrement 26)

to see in offices at the moment when

6:57

S… Speaker 2 (Nouvel enregistrement 26)

you say, you know,

6:58

S… Speaker 2 (Nouvel enregistrement 26)

some opportunities are bound to come because sellers

7:02

S… Speaker 2 (Nouvel enregistrement 26)

are maybe more willing to accept reality than they were two

7:06

S… Speaker 2 (Nouvel enregistrement 26)

or three years ago?

7:08

S… Speaker 2 (Nouvel enregistrement 26)

Do I understand you correctly?

7:10

S… Speaker 2 (Nouvel enregistrement 26)

Yeah,

7:11

S… Speaker 1 (Nouvel enregistrement 26)

I think there's very little real

7:15

S… Speaker 1 (Nouvel enregistrement 26)

distress in the market still.

7:17

S… Speaker 1 (Nouvel enregistrement 26)

I think financing conditions remain very accommodative.

7:21

S… Speaker 1 (Nouvel enregistrement 26)

I think banks are still taking a proactive

7:26

S… Speaker 1 (Nouvel enregistrement 26)

and they're being very

7:30

S… Speaker 1 (Nouvel enregistrement 26)

forbearing on issues and lending.

7:32

S… Speaker 1 (Nouvel enregistrement 26)

So I don't see major

7:37

S… Speaker 1 (Nouvel enregistrement 26)

uh distress coming through in the market i think there have been pockets i

7:41

S… Speaker 1 (Nouvel enregistrement 26)

think korean investors and officers have obviously struggled over the last few years and they've had

7:46

S… Speaker 1 (Nouvel enregistrement 26)

some issues with financing has been challenging um

7:50

S… Speaker 1 (Nouvel enregistrement 26)

and

7:51

S… Speaker 1 (Nouvel enregistrement 26)

There are pockets,

7:52

S… Speaker 1 (Nouvel enregistrement 26)

but overall,

7:53

S… Speaker 1 (Nouvel enregistrement 26)

I think it's more the willingness to accept and

7:57

S… Speaker 1 (Nouvel enregistrement 26)

to take the haircut and to recycle and reposition

8:01

S… Speaker 1 (Nouvel enregistrement 26)

portfolios to then catch a better performance elsewhere.

8:04

S… Speaker 1 (Nouvel enregistrement 26)

I think that's become a more logical option for many funds.

8:10

S… Speaker 1 (Nouvel enregistrement 26)

And a lot of funds are coming up to the end of

8:14

S… Speaker 1 (Nouvel enregistrement 26)

their lifetime if it's a closed -only fund,

8:17

S… Speaker 1 (Nouvel enregistrement 26)

or if their funds are facing redemptions,

8:19

S… Speaker 1 (Nouvel enregistrement 26)

they're getting to the point where they have to make that decision to sell,

8:22

S… Speaker 1 (Nouvel enregistrement 26)

so they're being more willing to sell.

8:24

S… Speaker 1 (Nouvel enregistrement 26)

But not necessarily from a distressed perspective,

8:26

S… Speaker 1 (Nouvel enregistrement 26)

from just a need to recycle that capital to meet

8:30

S… Speaker 1 (Nouvel enregistrement 26)

redemption.

8:31

S… Speaker 1 (Nouvel enregistrement 26)

So I think there is a bit more pressure coming,

8:34

S… Speaker 1 (Nouvel enregistrement 26)

but it's not necessarily pure distress.

8:36

S… Speaker 1 (Nouvel enregistrement 26)

It's just...

8:37

S… Speaker 1 (Nouvel enregistrement 26)

a bit more motivation to sell for more meaningful reasons.

8:40

S… Speaker 1 (Nouvel enregistrement 26)

And I think with the outlook improving for real estate generally,

8:43

S… Speaker 1 (Nouvel enregistrement 26)

I think the deal we've got signed now between the

8:47

S… Speaker 1 (Nouvel enregistrement 26)

US and Iran is a net positive

8:51

S… Speaker 1 (Nouvel enregistrement 26)

for real estate.

8:52

S… Speaker 1 (Nouvel enregistrement 26)

And I think with an improving real estate backdrop,

8:54

S… Speaker 1 (Nouvel enregistrement 26)

I think investors are motivated to get that capital back into areas that they're more positive

8:59

S… Speaker 1 (Nouvel enregistrement 26)

in and say,

9:00

S… Speaker 1 (Nouvel enregistrement 26)

okay, yes,

9:01

S… Speaker 1 (Nouvel enregistrement 26)

might have to sell at 70 cents in the dollar or

9:05

S… Speaker 1 (Nouvel enregistrement 26)

in the euro.

9:06

S… Speaker 1 (Nouvel enregistrement 26)

But I can get that 70 cents back into something that I think and I truly believe in in the long term.

9:10

S… Speaker 1 (Nouvel enregistrement 26)

And then it's maybe better for the strategy than just to continue to hold an

9:14

S… Speaker 1 (Nouvel enregistrement 26)

asset that I don't think I can get performance from at that valuation.

9:17

S… Speaker 1 (Nouvel enregistrement 26)

So I think there is that opportunity to do that.

9:21

S… Speaker 1 (Nouvel enregistrement 26)

It's there.

9:24

S… Speaker 1 (Nouvel enregistrement 26)

So that's probably part of the story.

9:28

S… Speaker 2 (Nouvel enregistrement 26)

Sorry,

9:32

S… Speaker 2 (Nouvel enregistrement 26)

I'm just taking notes.

9:36

S… Speaker 2 (Nouvel enregistrement 26)

No worries.

9:37

S… Speaker 2 (Nouvel enregistrement 26)

A question I sent you that you started to

9:41

S… Speaker 2 (Nouvel enregistrement 26)

answer,

9:42

S… Speaker 2 (Nouvel enregistrement 26)

but I wanted to circle back and

9:46

S… Speaker 2 (Nouvel enregistrement 26)

make sure I understand.

9:48

S… Speaker 2 (Nouvel enregistrement 26)

When I asked you what strategies and risk profiles seem

9:52

S… Speaker 2 (Nouvel enregistrement 26)

the most appropriate,

9:56

S… Speaker 2 (Nouvel enregistrement 26)

from what I understand,

9:58

S… Speaker 2 (Nouvel enregistrement 26)

you told me there could be...

10:00

S… Speaker 2 (Nouvel enregistrement 26)

both core and value -add deals to be done.

10:03

S… Speaker 2 (Nouvel enregistrement 26)

But anyway,

10:06

S… Speaker 2 (Nouvel enregistrement 26)

I thought I'd just circle back and make sure I understand you.

10:10

S… Speaker 1 (Nouvel enregistrement 26)

Yeah,

10:11

S… Speaker 1 (Nouvel enregistrement 26)

I'll give you some more comments on that.

10:12

S… Speaker 1 (Nouvel enregistrement 26)

So we run strategies that are low -risk and

10:17

S… Speaker 1 (Nouvel enregistrement 26)

are long -term strategies,

10:18

S… Speaker 1 (Nouvel enregistrement 26)

but also face a lot of importance on

10:22

S… Speaker 1 (Nouvel enregistrement 26)

liquidity.

10:23

S… Speaker 1 (Nouvel enregistrement 26)

So for those strategies,

10:25

S… Speaker 1 (Nouvel enregistrement 26)

we still really like core office markets.

10:29

S… Speaker 1 (Nouvel enregistrement 26)

In Paris CBD,

10:31

S… Speaker 1 (Nouvel enregistrement 26)

rents have increased a lot already.

10:33

S… Speaker 1 (Nouvel enregistrement 26)

And we know that the growth potential is more limited than

10:37

S… Speaker 1 (Nouvel enregistrement 26)

it used to be because rents are very high.

10:40

S… Speaker 1 (Nouvel enregistrement 26)

But if you can find a new

10:45

S… Speaker 1 (Nouvel enregistrement 26)

refurbished high quality office in the

10:49

S… Speaker 1 (Nouvel enregistrement 26)

eighth or secondarist and decimal,

10:51

S… Speaker 1 (Nouvel enregistrement 26)

four and a half percent yield.

10:55

S… Speaker 1 (Nouvel enregistrement 26)

with indexation,

10:56

S… Speaker 1 (Nouvel enregistrement 26)

either ILC or CPI indexation,

10:59

S… Speaker 1 (Nouvel enregistrement 26)

nine years firm.

11:00

S… Speaker 1 (Nouvel enregistrement 26)

We believe that that sort of property will deliver an attractive level

11:05

S… Speaker 1 (Nouvel enregistrement 26)

of returns over the long term.

11:08

S… Speaker 1 (Nouvel enregistrement 26)

And from a risk -adjusted perspective,

11:10

S… Speaker 1 (Nouvel enregistrement 26)

we think those returns look attractive because if you think indexation will be,

11:14

S… Speaker 1 (Nouvel enregistrement 26)

say, 2 % per annum over the next five,

11:17

S… Speaker 1 (Nouvel enregistrement 26)

10 years,

11:18

S… Speaker 1 (Nouvel enregistrement 26)

but...

11:20

S… Speaker 1 (Nouvel enregistrement 26)

And French bond yields are at,

11:24

S… Speaker 1 (Nouvel enregistrement 26)

say, 3 .6 today.

11:25

S… Speaker 1 (Nouvel enregistrement 26)

But if you adjust those for that inflation that you're going to capture,

11:29

S… Speaker 1 (Nouvel enregistrement 26)

the real yield spread is still about 300 basis points

11:33

S… Speaker 1 (Nouvel enregistrement 26)

from 4 .5 down to 1 .5 and the real bond

11:37

S… Speaker 1 (Nouvel enregistrement 26)

yield. So actually,

11:39

S… Speaker 1 (Nouvel enregistrement 26)

we think that that's quite an attractive spread

11:43

S… Speaker 1 (Nouvel enregistrement 26)

and an attractive pricing point for that long -term,

11:46

S… Speaker 1 (Nouvel enregistrement 26)

low -risk capital.

11:48

S… Speaker 1 (Nouvel enregistrement 26)

So even though you won't get maybe really strong growth,

11:50

S… Speaker 1 (Nouvel enregistrement 26)

those assets can still really contribute to strong

11:54

S… Speaker 1 (Nouvel enregistrement 26)

risk -adjusted performance in your portfolio.

11:56

S… Speaker 1 (Nouvel enregistrement 26)

So we really like those kind of assets.

11:59

S… Speaker 1 (Nouvel enregistrement 26)

We think they anchor a strategy's risk profile.

12:02

S… Speaker 1 (Nouvel enregistrement 26)

Paris CBD offices are going nowhere for

12:07

S… Speaker 1 (Nouvel enregistrement 26)

at least the end of my career.

12:10

S… Speaker 1 (Nouvel enregistrement 26)

So we know that that's a good place to be investing.

12:18

S… Speaker 1 (Nouvel enregistrement 26)

a another's perspective from a value -add perspective i think there are more attractive returns

12:22

S… Speaker 1 (Nouvel enregistrement 26)

many of our investors and the bulk of our investors to be fair want

12:26

S… Speaker 1 (Nouvel enregistrement 26)

10 to 15 percent net returns and we think

12:30

S… Speaker 1 (Nouvel enregistrement 26)

you can start to capture those through offices

12:34

S… Speaker 1 (Nouvel enregistrement 26)

London is a good example.

12:36

S… Speaker 1 (Nouvel enregistrement 26)

So West End offices is like CBD in Paris.

12:38

S… Speaker 1 (Nouvel enregistrement 26)

It's probably a bit dry now in some respects.

12:41

S… Speaker 1 (Nouvel enregistrement 26)

Rents are very high,

12:42

S… Speaker 1 (Nouvel enregistrement 26)

yields are quite low.

12:44

S… Speaker 1 (Nouvel enregistrement 26)

So it's suitable for that long -term core capital.

12:47

S… Speaker 1 (Nouvel enregistrement 26)

But if you're looking for value -add,

12:48

S… Speaker 1 (Nouvel enregistrement 26)

I think the city office market in London,

12:50

S… Speaker 1 (Nouvel enregistrement 26)

for example,

12:51

S… Speaker 1 (Nouvel enregistrement 26)

is very attractive because you've got very rapidly rising rents,

12:55

S… Speaker 1 (Nouvel enregistrement 26)

rents that are almost competing with the West End.

12:58

S… Speaker 1 (Nouvel enregistrement 26)

You've got constrained supply.

13:00

S… Speaker 1 (Nouvel enregistrement 26)

but you've also got a large market where you can source

13:05

S… Speaker 1 (Nouvel enregistrement 26)

interesting deals at a right price point to be able to start to

13:09

S… Speaker 1 (Nouvel enregistrement 26)

push for those higher risk funds.

13:14

S… Speaker 1 (Nouvel enregistrement 26)

That's in the UK.

13:15

S… Speaker 1 (Nouvel enregistrement 26)

In Paris,

13:16

S… Speaker 1 (Nouvel enregistrement 26)

we think that's the same.

13:17

S… Speaker 1 (Nouvel enregistrement 26)

We like E -plus offices that are well located in and around Paris because we

13:21

S… Speaker 1 (Nouvel enregistrement 26)

think there's more reversion you can capture.

13:23

S… Speaker 1 (Nouvel enregistrement 26)

We think debt costs are lower in Europe than the UK.

13:26

S… Speaker 1 (Nouvel enregistrement 26)

So,

13:27

S… Speaker 1 (Nouvel enregistrement 26)

you know, margins on prime offices are,

13:29

S… Speaker 1 (Nouvel enregistrement 26)

say,

13:30

S… Speaker 1 (Nouvel enregistrement 26)

140 basis points,

13:33

S… Speaker 1 (Nouvel enregistrement 26)

something like that.

13:34

S… Speaker 1 (Nouvel enregistrement 26)

So you're all in cost of debt as accretive.

13:36

S… Speaker 1 (Nouvel enregistrement 26)

You can capture that reversion.

13:39

S… Speaker 1 (Nouvel enregistrement 26)

And then we think that you can achieve higher returns.

13:43

S… Speaker 1 (Nouvel enregistrement 26)

closer to like double digits on a net basis.

13:45

S… Speaker 1 (Nouvel enregistrement 26)

So we think value adds is starting to stack up in

13:50

S… Speaker 1 (Nouvel enregistrement 26)

offices.

13:50

S… Speaker 1 (Nouvel enregistrement 26)

We obviously focused on construction costs.

13:54

S… Speaker 1 (Nouvel enregistrement 26)

We think what's going on in the Middle East is probably pushing up construction costs again

13:58

S… Speaker 1 (Nouvel enregistrement 26)

because of energy prices and commodity prices.

14:00

S… Speaker 1 (Nouvel enregistrement 26)

But the deal should be

14:03

S… Speaker 1 (Nouvel enregistrement 26)

supported for those costs remaining under control and therefore where rents

14:08

S… Speaker 1 (Nouvel enregistrement 26)

can get to enables you to achieve those value

14:12

S… Speaker 1 (Nouvel enregistrement 26)

-add returns.

14:13

S… Speaker 1 (Nouvel enregistrement 26)

So we have got,

14:16

S… Speaker 1 (Nouvel enregistrement 26)

we think that the menu of offices that

14:20

S… Speaker 1 (Nouvel enregistrement 26)

you could choose and pick from is growing from just one

14:24

S… Speaker 1 (Nouvel enregistrement 26)

type of office for the last five years to several more.

14:28

S… Speaker 1 (Nouvel enregistrement 26)

We still think there are some very toxic offices out there that we wouldn't touch,

14:32

S… Speaker 1 (Nouvel enregistrement 26)

but certainly some interesting opportunities.

14:35

S… Speaker 2 (Nouvel enregistrement 26)

All right.

14:36

S… Speaker 2 (Nouvel enregistrement 26)

And something I wanted to have...

14:38

S… Speaker 2 (Nouvel enregistrement 26)

Sorry,

14:40

S… Speaker 2 (Nouvel enregistrement 26)

I'm just making sure I got everything.

14:42

S… Speaker 2 (Nouvel enregistrement 26)

Something that I wanted

14:46

S… Speaker 2 (Nouvel enregistrement 26)

to have your...

14:47

S… Speaker 2 (Nouvel enregistrement 26)

One of the 10 reasons I

14:52

S… Speaker 2 (Nouvel enregistrement 26)

listed and I wanted to have your opinion on is...

14:55

S… Speaker 2 (Nouvel enregistrement 26)

Offices,

14:57

S… Speaker 2 (Nouvel enregistrement 26)

to me,

14:59

S… Speaker 2 (Nouvel enregistrement 26)

at least...

15:00

S… Speaker 2 (Nouvel enregistrement 26)

like the they remain the most institutional asset

15:04

S… Speaker 2 (Nouvel enregistrement 26)

class the more you know deep and liquid asset

15:10

S… Speaker 2 (Nouvel enregistrement 26)

class for for professional investors is that something

15:15

S… Speaker 2 (Nouvel enregistrement 26)

that you do you do you agree with that assessment is that something that

15:19

S… Speaker 2 (Nouvel enregistrement 26)

you take into account also you know if you're Aberdeen and you've got

15:23

S… Speaker 2 (Nouvel enregistrement 26)

a 150 million to deploy

15:27

S… Speaker 2 (Nouvel enregistrement 26)

you can

15:28

S… Speaker 2 (Nouvel enregistrement 26)

Either buy 160 apartments or

15:33

S… Speaker 2 (Nouvel enregistrement 26)

one.

15:34

S… Speaker 2 (Nouvel enregistrement 26)

You see where I'm trying to go?

15:36

S… Speaker 2 (Nouvel enregistrement 26)

Yes,

15:37

S… Speaker 1 (Nouvel enregistrement 26)

yes,

15:38

S… Speaker 1 (Nouvel enregistrement 26)

absolutely.

15:38

S… Speaker 1 (Nouvel enregistrement 26)

So,

15:39

S… Speaker 1 (Nouvel enregistrement 26)

indeed.

15:41

S… Speaker 1 (Nouvel enregistrement 26)

So I think when you're buying commercial property,

15:44

S… Speaker 1 (Nouvel enregistrement 26)

you are buying the bricks and mortar.

15:46

S… Speaker 1 (Nouvel enregistrement 26)

But very importantly,

15:48

S… Speaker 1 (Nouvel enregistrement 26)

you are buying conviction in your

15:52

S… Speaker 1 (Nouvel enregistrement 26)

tenant and their ability to pay rent.

15:56

S… Speaker 1 (Nouvel enregistrement 26)

And in offices,

15:57

S… Speaker 1 (Nouvel enregistrement 26)

you have more blue chip companies who have

16:01

S… Speaker 1 (Nouvel enregistrement 26)

the highest credit ratings,

16:02

S… Speaker 1 (Nouvel enregistrement 26)

who have the longest history of delivering strong revenues

16:07

S… Speaker 1 (Nouvel enregistrement 26)

for shareholders and for being very

16:11

S… Speaker 1 (Nouvel enregistrement 26)

robust sorts of cash flows for real estate investors.

16:17

S… Speaker 1 (Nouvel enregistrement 26)

versus industrials and logistics versus retail versus

16:22

S… Speaker 1 (Nouvel enregistrement 26)

student accommodation or senior living you have more a

16:27

S… Speaker 1 (Nouvel enregistrement 26)

deeper pool of

16:28

S… Speaker 1 (Nouvel enregistrement 26)

tenants that are of that quality that can give you those long -term cash

16:33

S… Speaker 1 (Nouvel enregistrement 26)

flows as an investor than in any other sector.

16:35

S… Speaker 1 (Nouvel enregistrement 26)

So yes,

16:37

S… Speaker 1 (Nouvel enregistrement 26)

we have to be selective and yes,

16:38

S… Speaker 1 (Nouvel enregistrement 26)

corporate risk varies between different companies,

16:41

S… Speaker 1 (Nouvel enregistrement 26)

but ultimately offices probably has the strongest source

16:46

S… Speaker 1 (Nouvel enregistrement 26)

of cash flows of any of the other sectors that I can think of.

16:50

S… Speaker 1 (Nouvel enregistrement 26)

I think residential is interesting because you have so many cash flows,

16:53

S… Speaker 1 (Nouvel enregistrement 26)

the strength of that cash flow is still very strong.

16:56

S… Speaker 1 (Nouvel enregistrement 26)

Because you have all the individual tenancies and you have very low supply and demand or

17:01

S… Speaker 1 (Nouvel enregistrement 26)

you have a very strong supply and demand balance that's in favour of investors.

17:06

S… Speaker 1 (Nouvel enregistrement 26)

So we do like that and it's a different underwriting

17:10

S… Speaker 1 (Nouvel enregistrement 26)

to commercial.

17:11

S… Speaker 1 (Nouvel enregistrement 26)

But in the commercial sectors,

17:12

S… Speaker 1 (Nouvel enregistrement 26)

when you're thinking about the different ones,

17:13

S… Speaker 1 (Nouvel enregistrement 26)

offices has that core body of

17:17

S… Speaker 1 (Nouvel enregistrement 26)

occupiers that give you that institutional strength

17:22

S… Speaker 1 (Nouvel enregistrement 26)

of cash flow,

17:23

S… Speaker 1 (Nouvel enregistrement 26)

which is important.

17:26

S… Speaker 1 (Nouvel enregistrement 26)

All right.

17:27

S… Speaker 2 (Nouvel enregistrement 26)

And because I see you got to run in five minutes,

17:31

S… Speaker 2 (Nouvel enregistrement 26)

so let me just ask you a last one and then I'll let

17:35

S… Speaker 1 (Nouvel enregistrement 26)

you go.

17:36

S… Speaker 2 (Nouvel enregistrement 26)

Because I read something yesterday,

17:38

S… Speaker 2 (Nouvel enregistrement 26)

so I couldn't send the question in advance because I literally saw it yesterday

17:42

S… Speaker 2 (Nouvel enregistrement 26)

in the evening.

17:43

S… Speaker 2 (Nouvel enregistrement 26)

But I read in a study,

17:47

S… Speaker 2 (Nouvel enregistrement 26)

I think it was CBRE,

17:48

S… Speaker 2 (Nouvel enregistrement 26)

that they were expecting vacant office vacancy to...

17:53

S… Speaker 2 (Nouvel enregistrement 26)

hit an inflection point uh in uh most european

17:57

S… Speaker 2 (Nouvel enregistrement 26)

markets where they were saying you know the the the effect of

18:01

S… Speaker 2 (Nouvel enregistrement 26)

remote working uh people that were going

18:06

S… Speaker 2 (Nouvel enregistrement 26)

to downsize have downsize now uh kind of way you know i

18:10

S… Speaker 2 (Nouvel enregistrement 26)

was wondering if that was part of your projections because i know you've got your your models

18:14

S… Speaker 2 (Nouvel enregistrement 26)

and your uh so i thought you'd be a good person to ask uh

18:19

S… Speaker 1 (Nouvel enregistrement 26)

yes so um

18:21

S… Speaker 1 (Nouvel enregistrement 26)

We would agree with that.

18:22

S… Speaker 1 (Nouvel enregistrement 26)

We can see that construction pipelines in

18:27

S… Speaker 1 (Nouvel enregistrement 26)

Europe and the UK are very constrained.

18:31

S… Speaker 1 (Nouvel enregistrement 26)

and we can see that the overall vacancy

18:36

S… Speaker 1 (Nouvel enregistrement 26)

is starting to roll over.

18:38

S… Speaker 1 (Nouvel enregistrement 26)

So even in Paris,

18:40

S… Speaker 1 (Nouvel enregistrement 26)

for example,

18:40

S… Speaker 1 (Nouvel enregistrement 26)

I think total vacancy in the MSCI index fell about

18:45

S… Speaker 1 (Nouvel enregistrement 26)

50 basis points last quarter,

18:48

S… Speaker 1 (Nouvel enregistrement 26)

which is a good sign that we probably passed the peak.

18:52

S… Speaker 1 (Nouvel enregistrement 26)

So at the overall aggregate level,

18:54

S… Speaker 1 (Nouvel enregistrement 26)

we would agree with that sentiment.

18:56

S… Speaker 1 (Nouvel enregistrement 26)

We think that overall office vacancy will start to pull.

18:59

S… Speaker 1 (Nouvel enregistrement 26)

We think a lot is being removed for conversion to residential

19:05

S… Speaker 1 (Nouvel enregistrement 26)

or to other uses,

19:06

S… Speaker 1 (Nouvel enregistrement 26)

or just being removed from the market through obsolescence,

19:10

S… Speaker 1 (Nouvel enregistrement 26)

no longer part of what the brokers would consider part of the leaseable

19:14

S… Speaker 1 (Nouvel enregistrement 26)

office market.

19:14

S… Speaker 1 (Nouvel enregistrement 26)

So we are there.

19:16

S… Speaker 1 (Nouvel enregistrement 26)

And it took...

19:17

S… Speaker 1 (Nouvel enregistrement 26)

It took seven years in Amsterdam and it took seven years in Dublin to get

19:21

S… Speaker 1 (Nouvel enregistrement 26)

to that point when they've gone through previous bouts of oversupply.

19:25

S… Speaker 1 (Nouvel enregistrement 26)

And we're going to get there in Europe again.

19:27

S… Speaker 1 (Nouvel enregistrement 26)

And we're almost exactly seven years again after the pandemic to the point

19:31

S… Speaker 1 (Nouvel enregistrement 26)

when vacancy starts to rise to when the market can rebalance.

19:34

S… Speaker 1 (Nouvel enregistrement 26)

to find the new equilibrium and we're on that kind of that seven -year

19:39

S… Speaker 1 (Nouvel enregistrement 26)

cycle so probably next year will be the time when overall office

19:43

S… Speaker 1 (Nouvel enregistrement 26)

vacancy will fall but having said that prime offices

19:47

S… Speaker 1 (Nouvel enregistrement 26)

have been hyped for a long time now um the sort of market and sort of

19:51

S… Speaker 1 (Nouvel enregistrement 26)

offices that the markets we play in have been very constrained for some time

19:55

S… Speaker 1 (Nouvel enregistrement 26)

Interestingly, in Amsterdam,

19:56

S… Speaker 1 (Nouvel enregistrement 26)

there's new regulation coming in that's going to limit the amount of new office supply coming

20:01

S… Speaker 1 (Nouvel enregistrement 26)

in and around the key city centre locations.

20:05

S… Speaker 1 (Nouvel enregistrement 26)

So we also see policy starting to support

20:10

S… Speaker 1 (Nouvel enregistrement 26)

this dynamic as well,

20:11

S… Speaker 1 (Nouvel enregistrement 26)

where it knows that we need to redefine what we need in cities,

20:15

S… Speaker 1 (Nouvel enregistrement 26)

which is probably more residential and a little bit less offices overall.

20:21

S… Speaker 2 (Nouvel enregistrement 26)

And that's what they did in Paris as well with the,

20:23

S… Speaker 2 (Nouvel enregistrement 26)

you know, the PLU,

20:25

S… Speaker 2 (Nouvel enregistrement 26)

I'm not sure if it's,

20:27

S… Speaker 2 (Nouvel enregistrement 26)

you know, they identified buildings.

20:29

S… Speaker 2 (Nouvel enregistrement 26)

Yeah.

20:30

S… Speaker 2 (Nouvel enregistrement 26)

So if you want to,

20:33

S… Speaker 2 (Nouvel enregistrement 26)

you know,

20:36

S… Speaker 2 (Nouvel enregistrement 26)

refurbish,

20:38

S… Speaker 2 (Nouvel enregistrement 26)

then you have to add residential.

20:40

S… Speaker 2 (Nouvel enregistrement 26)

Great.

20:45

S… Speaker 2 (Nouvel enregistrement 26)

I think we're close to when you've got to run anyway.

20:48

S… Speaker 2 (Nouvel enregistrement 26)

So thank you.

20:49

S… Speaker 2 (Nouvel enregistrement 26)

Thank you very much for taking the time again.

20:53

S… Speaker 2 (Nouvel enregistrement 26)

Sorry to keep you waiting.

20:55

S… Speaker 2 (Nouvel enregistrement 26)

And it's always really helpful to be able to talk

20:59

S… Speaker 1 (Nouvel enregistrement 26)

with you.

21:00

S… Speaker 2 (Nouvel enregistrement 26)

So I really do appreciate it that you were able to take the time

21:04

S… Speaker 2 (Nouvel enregistrement 26)

and what I imagine must be...

21:06

S… Speaker 2 (Nouvel enregistrement 26)

a busy day on your Paris.

21:09

S… Speaker 2 (Nouvel enregistrement 26)

Are you still in Paris now?

21:10

S… Speaker 1 (Nouvel enregistrement 26)

No,

21:12

S… Speaker 1 (Nouvel enregistrement 26)

I'm back in Edinburgh now.

21:13

S… Speaker 1 (Nouvel enregistrement 26)

I got back late last night.

21:15

S… Speaker 1 (Nouvel enregistrement 26)

And we have our Investments House View meeting today,

21:19

S… Speaker 1 (Nouvel enregistrement 26)

which is our multi -asset committee.

21:21

S… Speaker 1 (Nouvel enregistrement 26)

So I've just had two hours of meetings to discuss where

21:25

S… Speaker 1 (Nouvel enregistrement 26)

all the asset classes sit in terms of our overweight,

21:28

S… Speaker 1 (Nouvel enregistrement 26)

underweight recommendations.

21:30

S… Speaker 1 (Nouvel enregistrement 26)

I'm hopeful to deliver a positive message on real estate.

21:34

S… Speaker 1 (Nouvel enregistrement 26)

Well, I did that this morning and I hope we'll probably be having a positive allocation

21:38

S… Speaker 1 (Nouvel enregistrement 26)

recommendation from a sort of multi -asset perspective in the future.

21:42

S… Speaker 1 (Nouvel enregistrement 26)

And offices will be an important part of that.

21:45

S… Speaker 1 (Nouvel enregistrement 26)

Okay.

21:46

S… Speaker 1 (Nouvel enregistrement 26)

Luke Etienne,

21:47

S… Speaker 1 (Nouvel enregistrement 26)

could we review credit cards?

21:50

S… Speaker 2 (Nouvel enregistrement 26)

Yes, I will send a quote.

21:51

S… Speaker 2 (Nouvel enregistrement 26)

And I will send a quote as we always do.

21:55

S… Speaker 2 (Nouvel enregistrement 26)

uh if there was anything to tweak there feel free to tell

21:59

S… Speaker 2 (Nouvel enregistrement 26)

me and i have to admit i'm i'm a little bit jealous because i've been to

22:04

S… Speaker 2 (Nouvel enregistrement 26)

edinburgh last summer with

22:08

S… Speaker 2 (Nouvel enregistrement 26)

with my with my family and i'm just been yearning to go

22:12

S… Speaker 2 (Nouvel enregistrement 26)

back to scotland and edinburgh in particular since uh since then so

22:16

S… Speaker 2 (Nouvel enregistrement 26)

uh so if you see me sometime walking the street that just mean i

22:20

S… Speaker 1 (Nouvel enregistrement 26)

crave

22:22

S… Speaker 2 (Nouvel enregistrement 26)

I caved in and just decided to move there.

22:24

S… Speaker 2 (Nouvel enregistrement 26)

I love the city.

22:25

S… Speaker 1 (Nouvel enregistrement 26)

Well,

22:26

S… Speaker 1 (Nouvel enregistrement 26)

do let me know if you're ever going to come back.

22:29

S… Speaker 1 (Nouvel enregistrement 26)

Let me know because I'd be more than happy to give you recommendations,

22:32

S… Speaker 1 (Nouvel enregistrement 26)

show you around,

22:33

S… Speaker 1 (Nouvel enregistrement 26)

whatever.

22:34

S… Speaker 1 (Nouvel enregistrement 26)

I'll meet for a catch -up.

22:36

S… Speaker 1 (Nouvel enregistrement 26)

I'll be absolutely delighted to meet you.

22:38

S… Speaker 1 (Nouvel enregistrement 26)

And likewise,

22:40

S… Speaker 1 (Nouvel enregistrement 26)

do you know what?

22:40

S… Speaker 1 (Nouvel enregistrement 26)

I loved being in Paris yesterday.

22:42

S… Speaker 1 (Nouvel enregistrement 26)

I was on terrasse in the sun.

22:44

S… Speaker 1 (Nouvel enregistrement 26)

It was,

22:46

S… Speaker 1 (Nouvel enregistrement 26)

you know, you don't live in a bad place either.

22:48

S… Speaker 2 (Nouvel enregistrement 26)

Yeah, there's perks everywhere.

22:51

S… Speaker 2 (Nouvel enregistrement 26)

There's not a lot of European cities where you

22:56

S… Speaker 2 (Nouvel enregistrement 26)

don't want to go,

22:57

S… Speaker 2 (Nouvel enregistrement 26)

I have to admit.

22:57

S… Speaker 2 (Nouvel enregistrement 26)

But I really had a big impression of Edinburgh.

23:01

S… Speaker 1 (Nouvel enregistrement 26)

It's a lovely city,

23:04

S… Speaker 1 (Nouvel enregistrement 26)

it's a lovely city.

23:04

S… Speaker 1 (Nouvel enregistrement 26)

I was very lucky to watch the France game in an

23:09

S… Speaker 1 (Nouvel enregistrement 26)

Irish pub in La De France,

23:10

S… Speaker 1 (Nouvel enregistrement 26)

actually, on Tuesday night,

23:13

S… Speaker 1 (Nouvel enregistrement 26)

which is good.

23:13

S… Speaker 1 (Nouvel enregistrement 26)

I bet.

23:18

S… Speaker 2 (Nouvel enregistrement 26)

Thank you, boss. I'll let you run and thank you again so much.

Nouvel enregistrement 26

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