Vive la France

MIPIM’s host country was driving much of the optimism around European real estate at this year’s conference

France was the toast of this year’s MIPIM, as a record 26,000 property investors hit Cannes for four days of networking and discussion.

The country is considered a top draw among investors, and arguably the European market with the most widespread appeal. As one placement agent put it, France “is on an upswing all around.” Its gross domestic product growth reached 0.6 percent in the fourth quarter of last year, the fifth consecutive quarter where it exceeded 0.5 percent, according to the European Commission. Annual GDP growth rose sharply to 1.8 percent in 2017 from 1.2 percent in 2016, and is expected to increase to 2 percent in 2018.

This turnaround is happening after years of sluggish growth and is attributed in part to President Emmanuel Macron’s economic reforms, which seek to promote labor freedom and a market-driven economy.

Perhaps the greatest endorsement of the French property market at the conference came from a Swiss insurer, which is planning to return to the country after a 14-year absence. In fact, the insurer plans to award a France-focused mandate to an external manager by the first half of the year, and plans to invest $300 million to $400 million in equity in the country by the end of the year. Moreover, the organization’s deal pipeline – which will account for some of the $1.5 billion of real estate assets that the insurer expects to acquire this year – already includes potential transactions in France.

To be sure, uncertainty remains over changes in the European Central Bank’s monetary policy, and many expressed caution over the later-stage real estate cycle in the region. Still, MIPIM delegates noted a fair amount of optimism about Europe. It lags the US in terms of real estate income and rental growth. Growth is expected to accelerate in the former but slow somewhat in the latter. The consensus was that opportunities are easier to source in Europe than in the world’s largest property market, which delegates considered more fully priced.

Indeed, one fund manager in which two Asian companies have made entity-level investments told PERE the attraction for both organizations was the firm’s exposure to Europe. The firm expected China’s One Belt and One Road initiative, which focuses on new infrastructure between China and western Europe, will create more opportunities in real estate in the latter, particularly Poland.

One European market where there is less investor optimism, however, is the UK. The Swiss insurer told PERE it is being more prudent about investing there, as discussions with its investment committee about potential deals have been difficult because of the uncertainty over Brexit.

And yet, as always, there were differences of opinion over the attractiveness of certain European markets. Colliers’ International’s Cities of Influence report, released at MIPIM, put London top and the regional cities of Birmingham, Edinburgh, Manchester, Bristol and Leeds in the top 20, based on factors such as economic output, future employment capacity and fresh talent. Notably, Paris ranked as the second-most attractive European city.

With France’s economic momentum helping to bolster the optimism surrounding the regional property market, expect this year’s MIPIM to end on a high.

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