Signs that post-2008 distressed territories, particularly in Southern Europe, are coming back into favour with investors.
Press Release, Cannes, 14 March, 2014 – MIPIM, the world’s property market, celebrated its 25th anniversary in Cannes this week against a backdrop of largely positive industry results for 2013 and signs that post-2008 distressed territories, particularly in Southern Europe, are coming back into favour with investors.
20,500 delegates from 93 countries, including 4,500 investors, gathered in Cannes for a frenetic four days of business meetings and high-level industry talks at the RE-Invest Summit, the MIPIM Innovation Forum and the sixth Mayors’ Think Tank.
The traditional flurry of industry reports that are released during MIPIM highlighted that most markets are in strong recovery mode. JLL’s Office Investment Market Review noted 2013 investment in European offices reached €70 billion, a 7% rise on 2012. JLL predicted that 2014 will see continued growth in office investment, driven by Southern Europe and Ireland, an increase in portfolio sales, an increase in capital raised by private real estate funds and a 20% rise in the delivery of new offices.
Global property advisor CBRE’s European Capital Markets report confirmed that European countries that had been hardest hit by the 2008 economic downturn such as Italy, Spain, Portugal and Ireland, had bounced back more strongly than expected in 2013, with the total number of transactions in Ireland being three times higher in 2013 compared to 2012. International real estate advisor Savills predicts commercial real estate turnover will hit €3 billion in Ireland this year. Savills noted that retail investment volumes in Spain hit some €850 million in 2013 – three times the 2012 level – with Madrid and Barcelona drawing particular interest. This was reflected in Cannes by constant traffic to the stands of both cities.
One of the talking points on the MIPIM exhibition floor was the size of equity funds being raised in the United States that are destined to target Europe’s distressed assets. Among those funds, Starwood Capital is reported to be putting together some $2 billion. CBRE says that US investors account for the largest proportion of cross-border investment in Europe and that almost half of Spain’s commercial real estate transactions in 2013 involved US capital.
What became clear throughout the week is that Asian countries are taking an increasingly international approach to investing. Led by the Chinese, Asian investors carried out almost €7 billion worth of transactions in the second half of 2013, most of them targeting Britain.
China’s government-backed Beijing Construction Engineering Group (BCEG), making its first appearance at MIPIM, officially endorsed its partnership with Britain’s Manchester airport, construction group Carillion and the Greater Manchester Pension Funds, to build an £800 million business district around Manchester airport. BCEG is taking a 20% stake in the airport project joint venture.
According to John Forrester, DTZ’s Chief Executive, EMEA, investors are becoming increasingly precise in their investment choices. “It’s no longer simply a question of investing in Europe, or in an individual country, we are now in a situation where decisions are based on the attractiveness of individual villages and sectors in cities within countries. And we’re not just talking about the usual suspects such as London or Paris.”
2014 saw the third edition of the popular RE-Invest Summit, bringing together representatives from over 30 of the world’s leading sovereign wealth funds, pension funds, insurance funds and endowments. By the end of the Summit, the investors signaled they were preparing to increase their exposure to real estate, including such alternative assets as healthcare and student-related property.
One of the most respected executives in real estate investment, Allianz Real Estate CEO, Olivier Piani, tackled the question of whether insurance companies, sovereign wealth and pension funds are partners or competitors. He told his MIPIM audience that Allianz has a self-imposed cap of between €250 million to €300 million for a single property investment, after which it seeks partners. Olivier Piani commented that the biggest challenge in such partnerships is aligning long-term strategies between the various co-investors.
Reflecting a commitment by the Japanese government to revitalize the national economy, invest in new infrastructure and attract inward investment, Japan’s Vice Minister for Land, Infrastructure, Transport and Tourism (MLIT), Motoi Sasaki, headed a record 130-person delegation at MIPIM. Japanese companies showcased no fewer than 120 projects. The Vice Minister noted that infrastructure investment included plans for a new 500kph supertrain, which will bring 60 million people within one hour of central Tokyo.
Coinciding with Motoi Sasaki’s presence in Cannes, MIPIM organizer, Reed MIDEM, unveiled plans to launch the two-day conference and networking event MIPIM Japan, destined to take place May 20-21, 2015, in Tokyo. A MLIT statement welcomed the new event noting, “We are looking forward to welcoming the real estate professionals from around the world willing to invest or source investment in Japan and learn from the solutions Japan has managed to implement in regards to innovative cities, sustainable architecture and construction.”
MIPIM Japan is the latest edition to the MIPIM portfolio of shows, with the first MIPIM UK set to take place in London, October 15-17, 2014.
The MIPIM Mayors’ Think Tank, where over 80 mayors and city leaders met for closed-door discussions on sustainable urban development and resource management, identified the fact that city administrators are now looking at buildings which produce energy that may help cities of the future become net energy suppliers rather than consumers.
European Commissioner for Energy, Günther Oettinger, attended MIPIM to discuss energy issues and innovation linked to creating smart cities, a project that is supported by a multi-million euro European Commission fund.
The innovation required to develop the smart buildings and cities of the future, alongside new transport infrastructure solutions, combined with a more long-term approach to holding investments, were all evident throughout MIPIM.
“In many markets, investors and owners are focusing more on asset management than has been the case at other times,” commented MIPIM Director, Filippo Rean. “Investors are holding assets longer, so they’re increasingly planning how to use and develop their properties. The building’s energy efficiency, its links to transportation hubs and its flexibility over time, have become more and more important. This is why innovation, infrastructure and sustainability are so central to MIPIM.”
On city stands and inside the Mayors’ Think Tank, there was considerable discussion about the increasing cost of residential housing and the dangers of pricing many city dwellers out of the market. Mayors from as far apart as Turin, Warsaw and Bristol all agreed that they need more residential construction, including ‘affordable’ housing.
Mayor of London Boris Johnson, acknowledging the issue of rising house prices in London, told his MIPIM keynote audience that “it has never been more difficult to get on the (London) property ladder.” He confirmed that Londoners are expressing frustration over new residential projects being marketed solely to overseas buyers. Boris Johnson revealed that he had signed an agreement with 60 leading agents and developers who have committed to no longer offering London developments exclusively to overseas buyers. Instead, they have pledged to make such residential projects available to Londoners either before or at the same time as the overseas purchasers.
True to form, the MIPIM exhibits included some major new building projects. France’s Société d’Etude, de Maitrise d’Ouvrage et d’Aménagement Parisienne (SEMAPA), unveiled plans to build the first two towers in Paris for 40 years, as part of the multi-billion euro Grand Paris project.
A gigantic city of Moscow model drew huge attention from delegates at MIPIM, where Russia’s ambitious Skolkovo scheme – a Silicon Valley equivalent on the outskirts of Moscow – was heavily promoted.
From Brazil, the City of Maricá showcased Niemeyer Oceanarium, one of the last signature projects from Brazilian architect Oscar Niemeyer, who died last year.
And Turkey’s largest private real estate investment, the 1.6 million sq m mixed-use Tema Istanbul project in Istanbul, complete with a €288 million theme park, was presented to the international real estate community for the first time.
Image: Image & Co. /S. Halloy