Seasonal rentals, rental investments: what does summer 2020 look like?

With Emmanuel Macron announcing that all departments in France have moved to the green zone, the end of lockdown still raises many questions for owners and managers planning to rent out properties this summer: how to protect tenants from infection risks? What kind of return can be expected from a rental investment? What has been the impact of COVID-19 on SCPIs?

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Seasonal rentals and health measures: how to reconcile the two?

The health crisis linked to the COVID-19 epidemic has not dampened the French people's desire to go on vacation. Despite a significant impact on the tourism sector, confidence remains high: according to a survey conducted by the BVA firm, 81% of respondents are optimistic that their vacations will go smoothly, despite the still highly sanitized environment.

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For players in the tourism sector, the stakes are high this year, as only 8% of vacationers plan to travel abroad. Everything is therefore at stake on the domestic front. To reassure tenants, managers and summer rental agencies are pulling out all the stops to comply with government recommendations. Starting with rigorous cleaning protocols:

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• systematic and regular disinfection of rooms using a virucide that meets the EN 14476 standard or bleach diluted to 0.5% active chlorine; floor cleaning from the back of the room toward the exit, and from the top of the room to the bottom; distribution of hand sanitizer,
• wearing a mask when checking in guests
• , spacing out check-outs and check-ins by at least 6 hours to allow time to air out and disinfect the property; removing paper brochures, maps, and documentation,
• changing all cushions and throws
• ; compliance with social distancing in common areas, including swimming pools.

These recommendations were established by the UNPLV (National Union for the Promotion of Vacation Rentals), which brings together players in the tourist furnished rental market in France: Abritel, Airbnb, TripAdvisor, LeBonCoin, etc.

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Rental investments: a strong recovery, despite the pitfalls

In real estate, the lifting of the lockdown means a return to normal for industry players: the reopening of agencies and notary offices, the resumption of property viewings, and more. While the health crisis dealt a severe blow to the real estate market, many experts agree that, once again, real estate has proven its resilience during times of crisis.

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As for paper-based real estate (SCPIs, OPCIs, SICAVs) and rental investments, optimism is also present, but these sectors may take longer than expected to recover from the crisis, according to a study conducted in early April by the Observatoire du Moral Immobilier (OMI). The results reflect a nuanced attitude from investors:

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• 37% of them intend to postpone their rental investment project.
• 43%indicate that they intend to carry out their project within the initially planned timeframe, i.e., in the coming months.

It must be acknowledged that industry players pulled out all the stops during the lockdown. Thanks to the digitization of services, several management companies made it possible to invest in SCPI shares remotely through virtual tours and the dematerialization of documents and subscription processes.

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On the other hand, the latest trends in rental real estate investment also reflect a need for security among investors. The priority is on properties with immediate rental yields that present minimal risk of vacancy.

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SCPIs: a profitable investment in 2020?

Among the measures announced by the government at the start of the lockdown, one was particularly concerning for SCPI shareholders: the rent freeze for businesses. As a reminder, SCPIs are financial vehicles for collective investment in commercial real estate assets, as explained on Tacotax.fr. These management companies collect rents and then distribute the shares to investors (known as "associates").

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The announcement of the suspension of rent collection for commercial leases was therefore cause for concern, but that was without considering that the majority of SCPIs collect rents a quarter in advance. Ergo, most of them did not feel the effects of the crisis during the first quarter of 2020. This is evidenced by the collection for these first three months: 2.56 billion euros, an increase of almost 20% compared to the first quarter of 2019.

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Furthermore, the temporary rent suspension measure was primarily intended to support small structures (micro-businesses, SMEs), which are more vulnerable to the crisis. However, these companies represent only a small portion of SCPI portfolios, which focus more on "large" investments (offices, retail, warehouses, hotels, nursing homes, etc.).