EUROPE NEWS: MIPIM plays politics

It was impossible to avoid discussions about politics at this year’s MIPIM conference. Whether they were about Brexit, Article 50 and the future of the European Union, or continental European elections and Spanish political stability, most conversations in Cannes last month touched on the topic in one way or another.

The usual flurry of reports were unveiled at MIPIM, but one that drew significant interest came from advisory firm Colliers International, which predicted that the ‘two Donalds’ – namely US president Trump and president of the European Council Tusk – posed a greater danger to the real estate industry than Brexit.

“The remarkable feature of Brexit has been its limited impact on UK occupier markets,” said Richard Divall, head of cross-border capital markets for Europe, the Middle East and North Africa at Colliers. “In the UK, media attention has been centered primarily on Brexit, but this risk to investors is a small part of a much larger risk of wider EU fragmentation and new eurozone instabilities.”

Indeed, Brexit has not done much to deter the flow of foreign capital into the UK property market. Chris Ireland, UK chief executive at JLL, said this year’s conference reinforced his sense that the UK, and in particular London, remains a priority for overseas investors.

“There is a lot of Chinese and Asian money looking at the UK capital, and outside of London, there is a lot of appetite from German and Middle Eastern investors,” he said. “Some of the big overseas investors are also looking increasingly at how to get involved with major UK-wide development and regeneration projects.”

That said, “despite a number of very big deals, we expect transactions will likely flatten in the next quarter as the underlying general market is still short of stock. But pricing is strong and that does encourage more sales. We are seeing strong growth in industrial and logistics and in [alternative strategies] in particular.”

Colliers’ In the Balance: UK 2017 report suggested US economic policy and EU fragmentation were the biggest threats to the future of the UK commercial property sector. Despite hitting a cyclical peak in 2015-16, the market was being propped up by powerful macro factors such as low interest rates, the low bond yield environment, global demographics and the sheer weight of global capital seeking yield, the report said.

“The potential for global capital diversion to the US is substantial given the possibility of new protectionist trade policies, deregulation of US financial markets, new corporate-friendly tax policies and a much-anticipated fiscal stimulus linked to large-scale infrastructure investment,” Divall said.

Despite the substantial forces supporting global real estate, and UK real estate in particular, there were numerous risks to the health of the European property market, most significantly political shifts across the region. “Growing nationalism in key countries such as France, Italy and the Netherlands, among others, poses large risks to Donald Tusk’s mission to push forward EU political unity,” Divall added.

Meanwhile, Spain was a country of interest among some MIPIM delegates for its very lack of political instability. Carsten Czarnetzki, head of Spain at AEW Europe, pointed out that compared with many other western European nations, Spain now looks like an attractive option. The Spanish residential market in particular has attracted international institutional investors and has offered new real estate opportunities, noted Juan Velayos, chief executive officer of Spanish development firm Neinor Homes, which is owned by Lone Star Funds and is preparing to go public.

The Netherlands also had its moment at the conference, as relief was palpable among delegates from the country after the Dutch election result came through on March 15. Prime Minister Mark Rutte’s victory over far-right leader Geert Wilders marked the first genuine defeat of the recent populist movement in Europe. However, the Dutch mood was spoiled by a diplomatic spat with Turkey.

Away from politics

It wasn’t all politics at MIPIM, however. One other theme that emerged was the importance of asset management over the coming years, especially in Europe, where uncertainty is greatest. The consensus was that fund managers have had an “easy ride” in recent years, being able to rely on natural asset appreciation to generate returns rather than by employing the assortment of asset management strategies, such as improving the tenant mix, refurbishment and repositioning.

Therefore, those firms that have taken the time to expand and develop their asset management teams are much better prepared for the future than those that have not. Ian Williamson, head of core funds at LaSalle, said his firm began strengthening their asset management teams many years ago, a move reflected in LaSalle’s successful partnership with Aviva for their Encore Plus Fund, where Aviva is the fund manager and LaSalle is the asset manager.

After experiencing one of the most politically fueled MIPIMs in recent years, the consensus among delegates who spoke to PERE was that there has never been a more important time for the real estate industry to engage with politics and vice versa.

Vos rendezvous

PERE traditionally shares highlights from our MIPIM diaries. This year, we asked people which meetings stood out in their diaries

Who: Emmanuel Lumineau, chief executive of crowdfunding platform BrickVest

Meeting: An entrepreneurial billionaire

Why: “He’s looking to invest in real estate via a new model”

Who: Jon Zehner, global co-head of client capital at real estate investment management firm LaSalle Investment Management

Meeting: A currently less prolific sovereign wealth fund

Why: “We hope to convince them to achieve their goals by investing with us”

Who: Tom Buchmann, managing director at real estate tech start-up ParkBee

Meeting: One of Europe’s biggest REITs

Why: “These guys are going to be pretty useful to us in terms of parking supply”

Who: Sophie van Oosterom, EMEA chief investment officer at real estate investment management firm CBRE Global Investors

Meeting: Rival bidder on a deal

Why: “The meeting gave me the clues I needed for that deal. It wasn’t a planned meeting, but that’s what MIPIM is all about”

Who: Nick Hendy, senior director at CBRE Capital Markets, the real estate investment banking business of CBRE

Meeting: Unscheduled meetings

Why: “These are the meetings I look forward to most because they are not planned and the unexpected often happens”

Who: Juan Velayos, chief executive at Spanish development firm Neinor Homes

Meeting: A range of investors

Why: “This is a critical week with our IPO and I’m excited to test market sentiment”