Editor's Choice: Temperature rises to pre-2006 level at MIPIM 2014

A distinct buzz of excitement and anticipation was palpable at this year's edition of the MIPIM real estate fair in Cannes. Jonathan Hull, head of EMEA capital markets at CBRE, neatly summed up the change of sentiment since last year during his introductory address at CBRE's breakfast briefing earlier this week. 'There is less caution and more confidence,' he noted.

Hull and other CBRE speakers at the briefing no doubt helped to germinate new buds of optimism with figures for capital market performance over the past 12 months. CBRE's outgoing research head Peter Damesick got the ball rolling by pointing out that investment in EMEA rose 34% in 2013, a significantly stronger growth figure than for Asia and the US. And the momentum continues, he said, citing the results of CBRE's latest investor intentions survey. Western Europe heads the global ranking in terms of investment preference, with 70% of respondents targeting the region compared to 40% last year.

Cross-regional investors are driving the surge in investment volume in Europe and that trend is not about to abate any time soon, Damesick said, pointing to the increased diversity in sources of global capital coming to Europe, in particular from the Middle East and Asia. London, Paris and the big German cities continue to attract the bulk of investment flows, but the UK regions and other parts of Europe are starting to gain traction, according to Chris Brett, head of international capital markets UK. 'There is more money and it's not that it's moving to other markets,' he said during a panel discussion. 'We’re seeing the same amount in London, including Chinese capital in London. I don’t think we’re seeing it spread out, it’s growing across the markets. And it’s here to stay.'

Fellow-panellist Peter Schreppel, CEO of CBRE Germany, confirmed the strong appetite for investment in Europe. 'The whole of the Eurozone is picking up again and there is still a lot of money looking at Germany, there’s hardly a shift. The Eurozone problem has cleared up and it's easier to sell product in Germany now.' Spain has also bounced back in the past 12 months and new assets that have come to the market in recent weeks are attracting five offers or more, noted Adolfo Ramirez-Escudero, president CBRE Spain. The market is being driven mainly by private equity players and value-add funds, but core and institutional players are coming back as well, he said. ‘I wouldn’t be surprised to see investment volumes total €6 bn this year, compared to €4 bn last year.'

Taiwanese and Japanese investors next in line
According to Marc Guiffredda, executive director of CBRE in Singapore, Taiwanese investors are the next ones to watch in London and the rest of Europe thanks to large savings pools and low local yields which have 'bitten down' to 2.7% and lower. Japanese investors are next in line, he predicted. Another key trend that already started to emerge last year is the interest from global capital sources in partnerships with local players. Chinese developers are also getting into the act, Brett pointed out. Earlier this year Chinese real estate developer ABP signed an agreement with accountancy firm PwC to create a one-stop services point for Chinese businesses seeking to move to the UK capital. In the past few months other leading Chinese developers like Dalian Wanda and Greenland have also bought eye-catching sites in the UK capital. 'This was a key trend last year and will remain so going forward,' Brett commented.

London's status as the safe haven of Europe has also drawn interest from developers in other corners of the world. Late last year, CEE real estate developer HB Reavis announced it has branched out to the UK with the acquisition of a project in the in the heart of London’s financial district: a development site at 3 King William Street. The acquisition marks the company's first foray into the UK and more projects will follow, UK director Radim Rimanek told PropertyEU in an interview at MIPIM. 'We have quite ambitious plans for London. We aim to find a couple more projects in the next 12-18 months.'

Other players that flexed their muscles at MIPIM included the newly branded joint venture between Henderson and TIAA CREF which splashed its new logo TH (TIAA Henderson Real Estate) on just about every European and international property title present at the fair. The return of blind pool opportunity funds also sparked comments that sentiment was starting to revert to pre-2006 levels. 'It feels like 2005,' one market watcher said.

The rising temperature at this edition of MIPIM also prompted a note of caution from some property veterans that the market may be getting ahead of itself. The availability of stock will be the biggest challenge, noted Mike Sales, managing director and CIO global property at TIAA Henderson. Joe Valente, head of research at JP Morgan Asset Management, had a particularly pertinent warning: 'Ten-year cycles, five-year memories,' he commented wryly in an interview with PropertyEU.

It is to be hoped that there are enough senior property people around in this cycle to echo that sentiment in the years to come.

Judi Seebus
Editor in chief


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