Talk in Cannes was about digital infrastructure, operational risk, AI and office retrofits. Richard Lowe reports
As the rain lashed Boulevard de la Croisette and lightning briefly lit up the tightly connected streets of Cannes, the real estate industry was reminded that it was not operating in ‘normal times’. MIPIM, held every March in the South of France, is usually relied upon to provide two things: a barometer for the real estate investment market at the start of the year and a sun-soaked antidote to the cold and dark winters experienced by many of its attendees.
This week, neither was provided. The ongoing melodrama that is present-day geopolitics is providing an unprecedented level of uncertainty for investors and, as a result, real estate market forecasts are not worth the paper they are printed on – or, perhaps more accurately, the cloud servers they are stored on.
In fact, data centres proved to be central topic. One of the few convictions that could deduced from Cannes this year was that people fall into three camps: those investing in data centres, those who want to invest in data centres and those contemplating whether they should be too. Despite the recent uncertainty surrounding the future of demand from AI, investors seem clear that the scale of the digitalisation opportunity and the overall supply-demand imbalance mean they should be involved in some respect.
During MIPIM, Madrid-based real assets investment firm Azora announced it was planning to invest up to €2bn in a Spanish data centre project, while Blackstone received planning permission for the £10bn (€11.9bn) hyperscale data centre it is planning to build in Northumberland in the UK.
If ever there was a case to be made that the worlds of real estate and infrastructure are slowly colliding this was it. Last year, most of the talk about infrastructure related to unwanted competition from the increasingly popular asset class, but in 2025 there was more of a sentiment of opportunity and potential collaboration between organisations and teams.
The topic came up frequently at the beginning of the week at the closed-door RE-Invest gathering of pension, insurance and sovereign wealth funds. One US-based investor said it was increasingly bringing its real estate, infrastructure and private equity teams together when it invested in data centres, as well life-science real estate.
But the convergence of different areas of real assets and private markets has implications for the future of real estate, its overall associated risk profile and its place in asset allocation. Investments in data centres are tending to be executed via operational platforms, but this is not unique to the sector. It is often noted today that real estate is becoming ‘more operational’ in nature, moving away from the tradition of passive ownership and long leases to specialists operational expertise and the use of platforms with hands-on operational capabilities.
To this end, real estate is arguably drifting into the world of private equity. Ross Peter, who two years ago was given the new title of head of EMEA operational real estate at JLL, was asked during a panel session to outline what the concept really meant. There are many different definitions, he admitted, but fundamentally it referred to assets where cash flow was “driven by the operational platform”.
As Andrea Orlandi and Valentina Shegoyan recently argued in IPE Real Assets: “The argument that real estate is becoming another vertical within private equity is a reasonable one. Real estate investment, whether by asset (shorter-term leases) or structure (operating companies), has become more volatile and, therefore, riskier… it follows that if real estate is not a diversifier and private equity is a similar asset allocation alternative, the required return from real estate should be much higher.”
Achieving those higher returns will not be easy, especially against the backdrop of relatively high interest rates, but Orlandi and Shegoyan believe it can be achieved by embracing the operational risk and managing the complexity.
One roundtable at the RE-Invest Summit indeed concluded that real estate was becoming more complex and operational and that, while this presented difficult challenges, meant it might naturally clear a path over time for the truly innovative and capable real estate fund managers. Those that can demonstrate active-asset-management capabilities while also embracing operational risk and new technological advancements will thrive, whlie others will fail.
From AI to office retrofits
The use of technology and AI internally will become an increasingly important – and potentially differentiating – factor. It was clear from the investor roundtable discussions that individuals and organisations were at different stages of embracing and implementing AI within their research and decision-making processes.
AI could also play an instrumental role in the decarbonisation of real estate, which is perhaps the asset class’ biggest challenge in the coming years. This week, FirstPort Group announced the pilot launch of an AI-powered smart buildings platform, which aims to monitor functionality, safety and energy efficiency of complex properties and trouble-shoot issues in real time.
But it is in the office sector where the biggest pressures are being felt. Market fundamentals for the best qualitly office buildings in Europe are very strong today, but the swaths of secondary and tertiary assets in need of retrofits present the biggest pressure for institutional landlords.
Andy Pyle, global head of real estate at KPMG, said that with the rise of ‘smart cities’, there will growing demand from tenants for “tech-enabled properties”, which will mirror the rise in demand for energy-efficient ‘green’ buildings of the past decade.
While many investors continue to focus on ‘beds and sheds’ – or residential and industrial assets – a growing number are looking for opportunities in the out-of-favour office market.
Lee Coward, vice president of investments in Europe at Oxford Properties, said the Canadian institutional investor had “moved beyond” a focus on existing assets into “deployment mode”. Part of that would be in European logistics through its M7 platform – recently enlarged through a partnership with AustralianSuper – but could also a mean a return to UK office acquisitions for the first time in a decade.
The firm, which is owned by the pension fund OMERS, is currently bidding on assets, and Coward said it would look at number of opportunities, including existing assets and developments, but “heavy refurbs” were likely to be the “sweet spot” with large lot sizes of £200m and above.
Nicole Arnold, member of the board at Commerz Real, said the German fund manager had been talking to Asian investors recently about investing once again in offices in Germany and elsewhere in Europe.
“We are big believes in office”, she said, and Commerz Real is seeking to make value-add improvements to offices in the right locations and potentially convert those in the wrong locations to alternative uses.
The most important challenge for the industry is transform old, energy-efficient stock, Arnold said, and therefore the next 12 to 24 months will be the “time for asset management”. There will be a dearth of new supply in 2026, she added, and “the industry shouldn’t be shy”.
Investors will have to wait for MIPIM 2026 to see whether the industry rises to the challenge.
To read the latest IPE Real Assets magazine click here.
