David Aubin, BNP Paribas Real Estate Investment Management

David Aubin is Head of BNP Paribas Real Estate Investment Management. BNP Paribas Real Estate’s business lines cover the entire property cycle: Property Development, Transaction, Valuation, Property Management and Investment Management. BNP Paribas Real Estate is a subsidiary of the bank BNP Paribas. BNP Paribas Real Estate employs 3,300 people in 17 countries and has a network of 17 alliances. Here, David Aubin talks about his company and the major real estate trends we should expect for next year.

Tell us a bit about yourself and what you do with BNP Paribas Real Estate.

I joined BNP Paribas Real Estate Investment Management three years ago. My mission as a CEO was to create a unified, pan-European business line within the company. Before that there was Reim France, a 40 year old player inherited from BNP Paribas Reim Italy, which was inherited from the acquisition of BNL by BNP Paribas in 2005 and the activities in Belgium, Luxembourg and Spain, which were integrated in 2009 and 2010.

My task was to foster a leading European business line by building the transversal functions regarding acquisition, business development, equity raising as well as to create separate functions like compliance, risk management and communication. Beyond that, my role implied going outside the domestic scope and looking for more international investors, especially in order to attract more European investors to France, Germany, UK, Italy and the biggest markets.

In your opinion, what will be the key trends in the coming years?

First of all, I think one trend is clearly in favor of the core to core plus assets, especially in the commercial real estate side. This is because the spread between commercial real estate core yields and treasure bond yields is currently at its peak; therefore there is easy and safe value creation in this sector. It’s not that we consider that value-added or opportunistic investments would be less attractive but we consider that the core-to-core plus commercial real estate sector is interesting for both institutional investors and private investors.

One other key trend which is probably getting into our DNA is sustainability. The good thing about sustainability is that it’s a perfect way to reconcile ethics and the appetite for gain. We have to adapt our society to a better usage of energy and resources. In terms of economic efficiency, it also makes a lot of sense to try and build or refurbish buildings so as to make them very efficient in terms of energy consumption because this is reducing  the cost of use, making them more attractive to tenants and therefore to investors.

For instance, we have handled heavy refurbishment of Pablo Picasso building, located in Nanterre (Paris suburb) to have the PEQA, BBC Effinergie Label, a low energy building French standard. The results were a much more environmental friendly building (70% reduction of the energy consumption), also more comfortable, and more efficient for tenants.

Furthermore, I think that we probably have to look for opportunities to match investors’ and owners’ or sellers’ interests in view of a new equilibrium. I don’t believe that there will be a goldmine of assets in the distressed sector, that there will be masses of assets waiting to be sold at distress prices and bargains being done; we have been expecting that for so many years and there is really little happening.

I believe that we have to look for more equilibrium instead. For example, clearly the fact that banks are financing for real estate has diminished a lot in Europe careful is affecting the number of new buildings, which can be seen by the reduction in stock. It’s most probably creating a shortage in the years to come, difficulties to launch buildings in a speculative way, which is also an issue because speculative projects are necessary for the market to have a sufficient stock of buildings. So we will have to be creative in the way we address this and help owners and investors find a way to deal.

What is your growth plan in the coming years? Is there a strategy to get more into the Nordics? What is the growth there?

First of all, there are 17 alliances done by BNP Paribas Real Estate which mainly concern the brokerage and advisory business. On the investment management side it is a bit different because in our business is not so easy to partner with someone else.

Our approach is slightly different. Today we are predominantly active in France, Italy and Benelux so clearly we have to do a lot of business with Germany and the UK. So the key target in terms of geographical development is these two countries. Not only because it’s two big markets, but also in order to really appear as a European player, not just a Franco-Italian-Benelux player, we need to be in these two very predominant markets.

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