at the heart of investments
The real estate sector has a special place in national economies in that it accounts for a significant part of any country’s GDP.
Here, we will review how the main business lines in the real estate sector are developing, excluding businesses in the public works/finishing sector, which belong to a different economic and industrial context.
The growth of the construction and property development segments shows a gap between the supply and demand for new housing. Demand for new housing is largely driven by population growth and easy access to credit and, in part, by the relative increase in household purchasing power. However, supply is not growing as quickly, held back by the rise in production costs mainly attributable to the increase in regulatory constraints in certain countries.
The home automation segment is struggling to develop, as consumers consider the offer to be elitist in that it is too limited for what it costs.
The real estate transaction sector logically benefited from the price and transaction boom after the financial crisis of 2008/2009.
The real estate management market (third-party management and/or homeowners associations) has seen the massive arrival of large corporations to the detriment of independent firms. This activity, which is particularly conducive to economies of scale, should continue to be concentrated in the future, particularly following the tightening of the regulatory environment observed over the past few years.
Business creativity, operational responsiveness and effective management systems are the keys to business resilience. The deliberate and appropriate use of online tools is an unavoidable challenge that any companies in the sector seeking to increase their market share—or even just survive—must take on.
Property dealers and land developers have to underscore the valuation potential of acquired property in order to capitalize on the added value that they can create with their anticipation, creativity and execution capabilities.
These professions, which were reputed to be at the origin of the real estate crisis of the 1990s, have significantly improved and are no longer as brash as they were in the last century. With the almost uninterrupted increase in house prices in major cities, which have so far limited risks, those in the industry will sooner or later have to meet the challenge of stabilizing prices, which will come about as a result of an inevitable rise in interest rates.
Property management companies, whether publicly traded or not, are among those benefiting from soaring prices in major metropolitan areas and the substantial drop in interest rates.
After having largely traded off their residential assets in the early 2000s, and having taken advantage of the trend of leaders in the hotel and healthcare sectors, in particular, outsourcing their professional real estate assets, the challenges facing property management companies, whether specialized or not, are many: limiting the decline in rental income, preserving the value of retail properties under attack by the rise in e-commerce, restructuring and upgrading outlying commercial spaces, selectively repositioning themselves with residential real estate, perhaps a little too quickly abandoned, promoting intelligent and autonomous buildings, etc.
Real estate investment businesses aimed at individuals are still thriving thanks to the dazzling health of the real estate markets in major metropolitan areas, tax incentives and the general population’s lack of financial literacy and aversion to risk.
These businesses will have to prepare for a double threat, even if its occurrence doesn’t seem to be close: a reduction in tax incentives and stagnating or even falling real estate asset prices.
Finally, social housing operators are constantly confronted, at least in big cities, with the shortage of quality social housing, the necessary renovation of their property holdings and the management difficulties specific to their business segment: the day-to-day maintenance of buildings and proper rent recovery.
How can we help you?
As we have seen, all those in the various real estate markets must meet certain strategic and operational challenges to ensure their growth and sustainability. Zalis has generally recognized expertise in the fields of strategic and operational support and change management for companies undergoing change.
In addition to this general expertise, it has specific experience in the various real estate businesses, acquired in particular during numerous mandates carried out on behalf of industry leaders in their various markets, and in the sectors that we have mentioned.
Our mandates in the real estate sector:
- The strategy at the heart of all our mandates: helping those in real estate face complex situations that they cannot always foresee.
- Support in this changing sector with the emergence of new competitors and the increasing use of digital technology.
- Assistance with financial restructuring or operational turnaround, including help with the development of tools for studying and/or monitoring investments.
- Assistance in the definition and implementation of development strategies: investment project studies, structuring of complex operations, mergers and acquisitions, assistance in origination.
- In particular, we have the ability to develop powerful modeling tools to better understand these high-stakes operations requiring a specific and personalized approach.
A third LBO, massive debt, a declining market: this was the backdrop for a leading business in its segment in the real estate construction market.
A court-appointed administrator called on Zalis to help this large business in the single-family home market. The 18-month mandate enabled the business to:
- Reduce the time between the acceptance of a sale, the start of works and the delivery of the property, thus physically reducing the company’s working capital requirements;
- Enhance its organization and adjust its workforce without crisis, based on social dialogue;
- Restructure and motivate its entire sales and production chain;
- Find investors and arrange for a conversion of debt into capital to reorganize the company’s shareholding structure.
A real estate group that owned a large Parisian palace was in the midst of a shareholder battle and had called on Zalis to regain operational control of its entire establishment. After securing the perimeter, Zalis actively participated in the operational management of the crisis phase and allowed the shareholder’s exit through the sale of the hotel.
Zalis’s experience in operational crisis management made it possible to successfully complete the group’s reorganization process with a view to selling it to a major international group. The agile and efficient management of this mission enabled the completion of the sale process in a timely manner that was satisfactory to all stakeholders.