Professor François Ortalo-Magné is the Albert O. Nicholas Dean of the Wisconsin School of Business, and regularly contributes to the debates shaping today’s real estate market.
We sat down for a chat with Professor Ortalo-Magné as he prepared to pay a visit to MIPIM 2012.
What major changes has the market seen since MIPIM 2011, and were they what you expected?
Another major issue to resolve is how governments will get out of their deficits via competent, effective fiscal policies. I’m disappointed that we’re still in a tremendously uncertain environment, which is not conducive to long-term investment. If you don’t know how policy is going to change, you can’t predict your real estate investment returns. Uncertainty is sometimes worse than having the certainty of a bad future!
How is the market looking now? Are there any reasons to be cheerful?
There are a few reasons to be cheerful. A double-dip recession in the US is becoming less likely. Foreign investors in the US are once again showing interest in second-tier cities. In a crisis, everyone inevitably returns to New York and Washington, but we’re now seeing people exploring cities like Houston and Boston, which is a vote of confidence. That said, we should also ask ourselves: is it truly a vote of confidence, or are these simply the “least worst” places to invest?
The flow of funds towards real estate is still there – there is still money that needs to be deployed. Investors are not pulling back, but is that because they really want these deals, or because these are the only places where there are deals?
What trends and recurring themes do you think will emerge at MIPIM 2012?
There are many exciting themes I expect to see emerging at MIPIM 2012. One is that the industry is beginning to understand the role it has to play in urban happiness and workers’ performance. There is a definite link between working space and employee performance. We are starting to understand this link, and it is reflected in the architecture of the new spaces being developed.
I foresee a continued interest in smart and environmentally friendly mixed-use urban development. We don’t yet fully understand how new spaces can give a better return on interest, but, for example, There will be big winners and big losers in this trend, since some buildings simply can’t adapt to this new model – new builds will prevail and certain structures will be left behind.
What one trend or development will most affect 2012? Who will be the winners and losers from it?
We still don’t know where the global real estate community will place its bets in terms of emerging markets. China is clearly in the top two destinations for investments, but the second place is as yet unclaimed.
The demand for emerging market investments has yet to find a place to settle. Emerging countries have legal pains in setting up the right institutional environment to welcome foreign investments. The battle is still on for the next serious contender. It will be between India and Brazil.
Brazil is attracting attention now, but can they convert that attention into investment? India hasn’t yet done so, maybe now is Brazil’s time to shine.
François Ortalo-Magné will be delivering his wrap-up keynote address on the last day of MIPIM. He’ll be discussing the week’s themes, major news and giving his outlook for the coming year. Don’t miss it!