In a tough economic environment, Bouygues Immobilier consolidated its position as an urban developer/operator. Drawing on its expertise in green property, Bouygues Immobilier is basing its future growth on three strategic priorities: innovation to serve sustainable development, technical and architectural quality, and customer support.
How did Bouygues Immobilier's markets fare in 2014?
François Bertière: The French property market is closely linked to the general state of the economy. Following a trend which began several years ago, it continued to contract in 2014. Net demand fell in the commercial property segment as companies tended to relocate only when they found more efficient buildings at lower cost, leaving more surface area behind than they moved into. Investors showed a preference for buildings already let. Consequently, it is essential to find users before selling a building. The housing market also fell, for various reasons. Government policy was unclear before the summer, and municipal elections, which always put a damper on the market, did little to encourage buyers. And although consistently low interest rates gave potential buyers more purchasing power, banks' very strict lending policies were unfavourable to those with little or no cash contribution to bring to the table. The overall attitude on the market was to wait and see what happens next.
Do you think the measures announced by the government in the housing segment will open up prospects for growth?
FB: Yes, a real change occurred in the second half of 2014 in comparison with the period before that. The government took on board the importance of housing as a driver of economic recovery. The new incentives announced in September seem to be heading in the right direction because they favour the construction of housing at rents that middleclass people can afford and encourage investors to buy. But the measures could not be finalised until the end of last year, which means that we will not feel their full effect until this year.
How do you see Bouygues Immobilier's results in that context?
FB: 2014 was a good year for Bouygues Immobilier. Our sales rose to €2,775 million and our net profit was stable. Our financial situation is healthy and a substantial cash surplus shows that our business model is both effective and robust. We increased our share of the residential property market, seeing a 7% increase in reservations in a market which shrank by 3.9%*. We also did very well in the commercial property segment, launching a number of major projects such as the SMA headquarters at Porte de Sèvres in Paris, replacing the Pullman Hotel, and the sale to major French investors of the Green Office® development at Rueil-Malmaison, to the west of Paris. An innovative building, its tenants include wellknown names such as Unilever, American Express and Ingérop.
“Our financial situation is healthy and a substantial cash surplus shows that our business model is both effective ans robust”
And because you have a wide range of different customers, you are diversifying your products and services
FB: That’s right. We continued our diversification strategy in 2014. To give one example, we signed a partnership agreement with Acapace to develop Les Jardins d’Acadie serviced residences for senior citizens. That will enable us to expand on a market with substantial growth potential, with the backing of a wellknown operator and manager. Another example of our diversification policy is the acquisition of 100% of Loticis, a company which specialises in the development of housing subdivisions in the Paris region, and of La Chêne Verte, which markets building plots. These transactions bring us a new line of business which will help us to grow our detached housing activity around the capital, since we will now be able to roll out urban development and housing subdivision projects throughout the entire Paris region.
One highlight of the year was the launch of a project in Morocco. Can international markets offer alternative sources of growth for Bouygues Immobilier?
FB: International markets are clearly one of our strategic priorities, in the same way as our operations in France. Our international growth is centred on three countries at the moment: Poland, Belgium and Morocco. Bouygues Immobilier Polska has become a key player in the Warsaw property market in recent years and aims to build over 1,000 housing units a year in the medium term. The company passed a new milestone in 2014, extending its activity to the province of Mazovie with its first programme in the provincial capital Wrocław, the country’s fourth-largest city. We build around 150 housing units a year in Belgium, mainly in Brussels and Liège, and hope to double our activity in the medium term. We also launched our fi rst project in Morocco in 2014, a mixed-used development in Casablanca, work on which is due to start in the first half of 2015. We believe that there are real opportunities for growth in Morocco, especially in the intermediate housing segment.
Will green property continue to be a differentiating factor for you?
FB: The fact that money continues to be tight in a still-sluggish economy makes green property less immediately attractive for the time being. However, we are convinced that green value will make a comeback and that Bouygues Immobilier, as the leading property developer in France, has a responsibility to maintain its commitment in this sphere and differentiate itself from other players. That is what we are doing, both in the residential segment, where 99.5% of the housing units we sold in 2014 had BBC-Effinergie® certification, and in the commercial segment, where our Green Office® and Rehagreen® lines continued to attract customers throughout the year. We now have 15 Green Office® and fi ve Rehagreen® projects under development.
Bouygues Immobilier is now recognised as an urban operator: what progress did you make with UrbanEra® in 2014?
FB: UrbanEra® has two aims: to design and develop sustainable neighbourhoods tailored to the local context, and to create a new style of community-based urban living. How do we go about putting flesh on the bones of this idea? By taking advantage of our skills and expertise and by positioning ourselves as an urban integrator, bringing together partners and services for residents. The most recent example is our commission for the Coeur de Quartier project in Nanterre, a 73,000-m2 urban complex. We were able to coordinate the skills of all Bouygues Immobilier's entities in order to create a truly coherent project which comprises housing, offices – including a new 18,000-m2 Green Office® building – and street-level shops. The Forum, the highly innovative flagship building at the heart of the project, will include a 10-screen, 1,400-seat cinema, a bookshop, restaurants, a fitness centre and Cube Next, a physical and virtual digital technology platform. Coeur de Quartier is one of the fi rst large-scale mixed-use development projects under the Grand Paris plan. We are proud to have been asked to coordinate the building of this new, smart eco-neighbourhood.
“The vision of a sustainable and desirable urban environment will drive our growth strategy for the future”
All that seems to bode well for the future.
FB: Bouygues Immobilier is unequivocally committed to a medium-term growth strategy. However, as our sales reflect marketing activity in the preceding three years, we will see a decline in 2015 as a result of the sharp contraction of the a lesser extent, 2013 and 2014. Having reached a low point, the situation will improve from 2016.
In a highly competitive market, how will Bouygues Immobilier diff erentiate itself?
FB: Quite simply by innovating. The world is changing. This is not just another recession but a fundamental change. Our role is to anticipate these changes and turn them into opportunities. That means we have to innovate constantly in order to create new products and services which add value for our customers. In addition, we position ourselves as a responsible and trustworthy developer capable of off ering highquality, sustainable and aff ordable housing to a wide range of customers. Households' purchasing power is stable at best and in many cases being eroded. On the other hand, they expect better quality, more comfort and greater energy efficiency. We respond to those expectations by controlling our costs – our people have rolled out a special programme called Oxygène for that purpose – without ever sacrificing the architectural and technical quality of our developments.
Digital technology is having an impact in many areas, including property development. What are you doing to factor in this new element?
FB: Digital technology is generating new expectations and new uses among our customers in both the commercial and residential segments, so it is essential for us to react in the right way. We will be opening our first connected and collaborative workspace, Nextdoor, at Issy-les-Moulineaux in 2015. In the residential segment, we are currently reviewing our entire customer support policy to make it easier for prospective buyers to take their decision. Bouygues Immobilier already off ers a fi nancing platform, 3D viewers and smartphone apps for connected homes as part of our response to this new trend.
That means you have to transform the company.
FB: That’s right, and we have a number of ongoing projects at Bouygues Immobilier with the longterm aim of adapting our business practices and working methods to the modern world. We have to be more open and more flexible. We have launched our own corporate social network in order to stimulate collective intelligence and encourage collaborative working. We are also developing that spirit of community and openness outside the company by supporting start-ups with promising projects that could create value for our customers. We are already working with new companies specialising in 3D visualisation.
What are your long-term goals?
FB: For us, UrbanEra® represents a commitment to a sustainable and desirable urban environment, both in France and elsewhere. That is the vision which will drive our future growth strategy and which we have sought to express more tangibly in the “10 Ideas” section of this review. We have to understand and constantly anticipate the needs of local authorities and future city dwellers whose lifestyles are profoundly infl uenced by digital technology and the sharing economy. It is our job to design and build the neighbourhoods they need and want. The vision of a sustainable and desirable urban environment will drive our growth strategy for the future.
* Source: ECLN (new housing survey).