Daniel While, Research and Strategy Director of Euryale, explains why real estate assets formerly classified as alternatives are now found at the heart of a wealth allocation strategy aimed at both “ to preserve capital and prepare for the future “. Among these resilient assets, health sector assets have their place. Analysis.
Investing in real estate means investing in rental yield. In order to reduce their risk, the investor by nature favors an allocation favoring assets “ quality » or presenting an advantageous location for a given market. Thus, in recent years, vehicles offering investment in a portfolio of offices, or ground floor businesses, have constituted the main core of asset allocations. Thanks to their said character prime and stable. Core around which alternative assets revolved. Like health ones, for example. This is the “core/satellite” approach that we know in securities.
The structural crisis in uses and the rise in rates have reshuffled the cards
But the structural crisis in uses and the rise in rates have reshuffled the cards. It is the assets which traditionally constituted the core of allocations, deemed to be low risk, which have suffered the greatest corrections. The Ile-de-France office market has proven to be the most sensitive to the various upheavals of the last four years. The rapid rise in key rates, between June 2022 and September 2023, stopped the dynamic of revaluation of real estate assets initiated from 2012. And it led to a marked devaluation, in particular for cyclical assets: offices, logistics and retail. The office market has also suffered from the double whammy of changes in uses linked to the rise of teleworking after Covid. From campus office to nomadic office, the formats requested by companies have changed completely. And this evolution is far from being finished or guaranteed…
Only certain assets, like health, have shown themselves to be structurally resilient in the face of the crisis.
In this context of market downturn, only certain assets, such as healthcare, have shown themselves to be structurally resilient in the face of the crisis. These assets, formerly described as alternatives, now find themselves, legitimately, at the heart of a wealth allocation strategy aimed at both preserving capital and preparing for the future. When office and retail assets will instead now constitute entry points – just as legitimate – due to their recent devaluations. Acyclical, and therefore by nature much less sensitive to economic fluctuations, healthcare assets have demonstrated their resilience and have lost little, if any, value. They also offer unique long-term visibility given the growing structural needs of the sector, whether in terms of healthcare accommodation or structures associated with care in general.
Health assets: investment opportunities, in France, but also internationally
Let us take as a sole illustration the question of the aging of the population in France, with an estimate of 2 million dependent people in 2024. The need for care, support and accommodation is enormous. And constitutes a dynamic and stable future market in its growth. And all the more so since private operators, tenants of real estate funds, will necessarily take over from a public sector running out of resources. This asset category also represents an international investment opportunity[1]. Because, unlike France where “3-6-9” leases are the norm, foreign operators most often commit to very long leases, up to 30 years firm…
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Regarding Euryale(i)
First player to position itself in healthcare real estate, Euryale is the 7th largest investor in the health sector with a capitalization of €3.29 billion. Its 260 assets mainly target the health sector (accommodation establishments for the elderly and disabled, clinics, medical homes, laboratories, assets linked to research, “Life Sciences”, etc.) and are distributed across nine countries (France , United Kingdom, Germany, Italy, Iberian Peninsula, Canada…). Euryale manages the SCPI Pierval Santé, labeled ISR in 2023, and the SC Trajectoire Santé. Through its two vehicles – the first to be sharing funds, for the benefit of the Brain Institute – the company favors a heritage approach that both creates value and has a positive societal impact, while integrating ESG issues into the all of its investment and management processes.
- Information taken from an official company document.
[1] With its SCPI Pierval Santé dedicated to this type of asset, Euryale has worked for 10 years to support the needs of this sector while offering investors capital stability and controlled risk through international geographic diversity.
