Altarea

Altarea is notably committed to the sustainability taxonomy. While exact comparisons are challenging, Altarea appears to have embraced this theme swiftly and earnestly. If sustainability is defined as constructing optimal apartments, Altarea deserves high recognition. The units delivered comply with stringent norms for low energy and carbon consumption. However, the construction sector inherently generates significant emissions, and reducing its footprint may necessitate lower long-term deliveries.

Altarea, like other developers, faces a global paradox: increasing apartment numbers, space per inhabitant, and comfort, while aiming to improve humanity’s environmental impact. Frugality is the ideal solution, yet it is unlikely that individuals will willingly reduce their footprints. Our belief is that sustainability is costly. Since 2023, the question has been whether sustainability is affordable for buyers, as it is challenging to align with mass markets.

Governments must guide citizens towards sustainable behaviours. The French residential development market accounts for less than 1% of existing homes annually, highlighting the need for renovation. Existing buildings still carry the burden of past carbon emissions, akin to non-recourse debt. Stricter regulations could favour the secondary market or compel developers to build new structures, benefiting only the wealthiest. This is the challenge governments must address, and Altarea may need to adapt accordingly.

A final consideration is the long-term impact of demographics in France. The ageing population and declining birth rate will soon question the annual need for new housing. While demand will persist in economically vibrant areas, the market may naturally rebalance housing practices. Until then, a tense transition period for housing and rents is expected to last at least another decade.

We believe that global warming will significantly impact housing in the West and, consequently, the real estate development sector in the long term. However, this impact is too distant to be currently assessed or valued.

Altarea is notably committed to adapting to the taxonomy, demonstrating a level of sincerity uncommon among developers. While this does not provide a competitive advantage, it reflects a commitment we value, warranting a 5% “Analyst Joker’s View” bonus.

Property companies typically experience significant carbon emissions at the start of construction, with minimal emissions thereafter. This is also applicable to developments on large land areas, such as car parks. Subsequent carbon consumption is low, as most extensions are minor in terms of square metres annually, whether at constant or current perimeters.

Water and energy consumption are low but remain crucial in showcasing retail property companies’ sustainability efforts. Shopping malls, akin to hypermarkets, are central consumer spending hubs. This setup may optimise the physical flow of goods compared to peer-to-peer online distribution, which involves increased deliveries, transportation, and warehousing.

Similar to oil companies, buyers and tenants are primarily responsible for initial carbon emissions. Altarea’s efforts to optimise emissions align with French law, and it should promote alternative construction methods, such as wood and pre-fabricated structures. However, it is uncertain if these higher-cost constraints align with buyers’ financial capabilities. Renovation could be a viable alternative, alongside citizens altering their habits, as the number of inhabitants per house is at a historic low, while square metres per inhabitant are at a historic high.

By delivering state-of-the-art buildings, Altarea helps optimise heating and air conditioning costs, though this alone does not qualify its business as “green.” The rise of remote work may lead to more decentralised uses, necessitating further land transformation at the expense of centralised offices. In summary, Altarea could benefit from the work-from-home trend. Citizens must adopt positive habits independently.

With 2,000 employees, Altarea is a significant player in French residential development. However, as the company subcontracts all construction work, assessing social issues at this level is challenging.

Altarea has maintained team integrity despite a sharp market adjustment since 2022. To continue this stability, consistent bookings are essential for 2025-26. Management appears committed to preserving the group’s expertise to be well-positioned when the market rebounds. This alignment of interests between shareholders and employees is a positive social aspect.

Altarea designs apartments, indirectly addressing broader social issues such as wellbeing, amenities, co-working, and student residences. As a major provider of affordable housing for non-profit organisations like French HLMs and “intermediate buy-to-let” landlords such as Action Logement and CDCH, Altarea is responsible for constructing state-of-the-art buildings that comply with the latest standards, including RE-2020.