This year's MIPIM convention in Cannes was a smaller and far more sober affair than last year's. Richard Lowe reports from the Mediterranean sun on an industry that looks to have come to terms with its problems

It can be difficult to feel gloomy and anxious about the prospects for real estate markets when the Mediterranean sun is shining unremittingly and waves lap gently against the side of a fund manager's yacht. MIPIM, the annual gathering for the property industry in the south of France, is often portrayed in stark contrast to the practical and efficient workmanlike affair that is Expo Real. Rather than navigate conveyor belts around a gargantuan warehouse on the outskirts of a wintry Munich, MIPIM delegates are commonly faced with the task - among other things - of boarding yachts and attending beach parties in the early spring Cannes sunshine.

That is not to say that the 18,000 or so attendees had nothing to worry about. The outlook for economies, the global banking system and real estate markets is still veiled in uncertainty and pessimism. And for a large proportion of investors and fund managers, 2009 is expected to be an uncomfortable year as they look to manage debts and deal with further capital value falls and weakening occupier markets.

But it was not so much that the Mediterranean sunshine served as a distraction to the problems facing real estate investors, rather the industry, in a collective fashion, appeared to have come to terms with the situation much more readily than it did in October 2008. The number of delegates this year was substantially lower than 2008 (approximately 29,000), but those present often remarked that it was somewhat of an improvement on last year's throng and actually was reminiscent of MIPIMs of yesteryear. Indeed, delegates praised the apparent higher ratio of senior management and ‘decision-makers' compared with that of last year's swollen ranks. The impression was that the important meetings were getting done, with less emphasis on the yachts, beach parties and hillside villas.

There were still a number of yachts moored alongside each other in countless succession. LaSalle Investment Management, RREEF, Aberdeen Property Investors, Henderson Global Investors, were among the fund managers opting to moor, alongside a number of property agents like Cushman & Wakefield and DTZ, law firms and British local authorities. On the other hand, the team at ING Real Estate did not turn up with their show-stealing three-masted schooner, as they did in previous years. Savills swapped their yacht for a café area to the side of the Palais Festival. The likes of Jones Lang LaSalle, King Sturge and CB Richard Ellis also cancelled their parties this year.

For a large proportion of investors and fund managers the onus was squarely on looking after existing assets, whether that be talking to tenants or managing existing debt financing. For those in the fortunate position of having cash to deploy, the focus was more on where the best investment opportunities were likely to arise in the coming months. Three markets were mentioned time and time again: Paris, Germany and London, albeit for different reasons.

The latter was understandably the hot topic, since UK property has seen the most dramatic repricing in the past 18 months and is often regarded as being six months ahead of continental markets. There is also the growing attraction of investing euros into assets priced in increasingly weak sterling. This scenario makes it less likely for UK investors to look outside their domestic borders for the time being.

Cash-rich, low-geared investors such as German open-ended funds are keen buyers of UK real estate today, having been kept out of the market in recent years by low yields and competition from more aggressively leveraged players. Of course, this applies only to those German funds that are not currently frozen due to unmanageable redemption requests. Commerz Real is one of the few to have remained open in recent months and still on the buy side.

 "It is probably not the real bottom, but nobody knows when the real bottom will be hit," said Hans-Joachim Kühl, member of the management board, speaking about the UK market. But, he continued: "We believe it could be a good time to get back, and in the mid- to long-term perspective the London real estate market is rather undervalued than overpriced. So we see there a good opportunity."

This sentiment was echoed a number of times, with the UK being seen as offering the greatest opportunities in Europe and possibly worldwide. Olivier Piani, chief executive of Allianz Real Estate, on the other hand, delivered a somewhat contrary view. Asked to rank the top three potential destinations for investor capital, he placed Paris and then Germany ahead of the UK. Piani accepts that the UK market has repriced the most, but has concerns about the effects the global downturn and economic recession are yet to have on its fundamentals there.

Allianz Real Estate has recently doubled its target allocation to real estate, potentially affording it billions of euros to spend on real estate in the coming years. This is the sort of news that makes reassuring reading for investment managers looking to raise capital. However, Piani made it clear the institution was in no way under pressure to start committing to new real estate investments in the near future - perhaps not even in the next two years.

This year's MIPIM offered a snapshot of an industry in a sober mood, endeavouring to sustain itself by resolving its core issues and seeking to purge some of the dangerous excesses of recent years.