The MIPIM wrap: Four big trends in the spotlight
From the hunt for yield to nurturing future leaders in real estate, these are the topics that dominated the conversation at this year’s MIPIM.
Put 26,000 real estate professionals in the South of France for four days at a time when geo-politics is casting a huge cloud of uncertainty over a long real estate cycle and there’s no shortage of conversation starters.
While the spectre of Brexit loomed large, topics such as the search for the next generation of real estate leaders, the revamping of outdated real estate, competition between European and global investors and the changing needs of occupiers all featured heavily at Europe’s annual international trade fair for property investment in Cannes.
“There’s been a quiet resilience among people at MIPIM this year,” says Matthew Richards, JLL Head of EMEA Capital Markets. “The energy that’s been present in previous years is tempered but there’s an underlying confidence that’s still there.”
Here are four of the biggest talking points from Cannes:
Looking for value
Global property funds are set for a very strong year in 2019 with inflows set to reach a record high as commercial real estate continues to grow in popularity.
Yet deploying the capital and finding decent yields is becoming more challenging.
“For investors in European real estate, finding value is a real talking point this year,” says Richards. “The focus in that search for value is on city-based, rather than thematic investing. This is going back to what real estate has always been about, which is local knowledge. You can find value by unpicking a local market.”
Currency and competition
Competition between European investors - notably German and French institutions - and those from Asia, has been further intensified by currency fluctuation.
"Exchange rates mean that euro-denominated investors - who have largely invested in core real estate - are better to invest in Europe than in the US or Asia at present," says Timo Tschammler, CEO of JLL Germany. "But Europe is also the exact target for Asian capital - so competition just gets stronger."
That competition is increasingly bringing Europe's residential sector into focus - along with other forms of living space such as student housing, healthcare and retirement homes.
But opportunities are limited. "Allocations to residential and living sector real estate are set to rise considerably," says Adam Challis, JLL head of residential research for the UK and EMEA. "But the greatest barrier is the lack of investment opportunities across the entire living spectrum."
More collaboration needed
The workplace is changing rapidly with new technology and the rise of flexible space giving both investors and occupiers plenty to think about.
Better collaboration between the two groups will be key moving forwards. The extent to which investors in European real estate understand the needs of occupiers will become increasingly important to provide spaces that best fit their requirements.
If the right type of buildings aren’t available, it could impact on the business plans, practices and ultimately the success of occupiers too, says Charles Boudet, CEO of JLL France.
"Workplace layout and design are having a growing importance on leasing," he says. "It’s not just about what building could fulfils their space and locations requirements, but how the workplace itself will help thrive and retain new talent."
Outdated office spaces are also in need of a refresh. "The need for capital expenditure on existing assets is a tangible - and arguably a greater issue for some investors than deploying new capital in a late cycle," says Gianluca Romano, global head of underwriting and advisory at JLL. "Things are changing so fast that existing assets risk becoming obsolete."
New leaders of the future
For the first time, MIPIM included a Young Leaders Summit focused on Millennials and their impact on the real estate industry both now and in the future.
"We're coming to an inflection point as more opportunities present themselves for young leaders who are digital natives, environmentally aware and socially conscious," says Emma Tattersall, EMEA retail capital markets director at JLL.
"That's going to empower a new generation of leaders to drive business in our industry in a new direction." It could, says Tattersall, alter the strategy driving investment decisions and "hopefully make our industry a more inclusive and diverse space".