8 marzo 2012

INVESTORS SEEK LOW RISK AT MIPIM

Cannes, March 8, 2012 – From Chongqing to Tokyo, via Downtown Doha, Paris, London and New York, delegations from 83 countries gathered in Cannes this week to attend a MIPIM which saw minds concentrated on quality, low risk investment opportunities, urban development and how the tight debt financing situation will impact the European market.

And at the end of the day, the general feeling among the 19,300 delegates, including 4,200 investors, was that despite uncertainty over the availability of bank financing, prime cities and locations will continue to attract strong investor interest, with many cities using their low-risk potential as a selling point.

Summing up the state of the European real estate market during a keynote address, Jean-Michel Six, Managing Director and Chief European Economist at Standard & Poor’s and Bernhard Berg, Managing Director of IVG Institutional Funds GmbH, predicted that investors will continue to be drawn to prime property because of its attractive yields compared to bonds. Bernhard Berg told a packed auditorium that focus is likely to be on high-quality, core properties in excellent locations with long leases and good tenants. He added that as office prices rise, investors will increasingly turn to retail.

Among the star real estate markets of 2011 was MIPIM 2012 Country of Honour, Germany. Investment levels last year hit €23.5 billion, 20% up on 2010, with foreign investors accounting for 34% of commercial investment in Germany. Reflecting Bernhard Berg’s predictions about investment targets, retail property in Germany made up 42% of total transactional volume last year.

During the course of MIPIM, international real estate advisor Savills said it sees a potential shopping centre undersupply in Germany as providing potential investment opportunities, particularly in Südlicher Oberrhein, Münster and Munich. Savills identified 200 shopping centres in need of refurbishment and said retailer expansion into the German market will also drive business.

Meanwhile, Berlin’s newly-appointed Senator for Urban Development and Environment, Michael Müller, used his time at MIPIM to promote two large residential schemes as well as the redevelopment of the Tempelhof and Tegel airports.

“Germany is seen as being either an ‘attractive’ or ‘very attractive’ investment opportunity by the vast majority of international investors. Its economy has weathered the eurozone crisis well and the real estate sector has proved its national and international expertise time and again. Put all these factors together and you see why we felt it appropriate to pay tribute to Germany as our 2012 Country of Honour,” commented MIPIM Director, Filippo Rean.

The impact of the eurozone’s rollercoaster ride was the focus of a packed MIPIM keynote address by former German Foreign Minister Joschka Fischer. Commenting on the likelihood of a widespread withdrawal from the euro, Josckha Fischer joked, “It’s easy to make an omelette out of eggs. It’s not easy to make eggs out of an omelette!” With Germany re-assessing its policy toward nuclear power, the former Foreign Minister said that within Germany and beyond, the changes in energy use and sourcing “will have a tremendous impact on the real estate industry and offers huge opportunities.”

Industry reports look to future

As MIPIM progressed, a series of industry reports and analysies was released to map out the state of play within the international real estate sector.

According to Cushman & Wakefield’s Global Property Investment Outlook, “Despite the currently cautious mood in most global property investment markets, a stronger second half of the year is expected with a potential 20% hike in activity levels forecast, driven by increased confidence and a release of pent-up investor and tenant demand.”

The report noted a 42% increase in industrial real estate investment in Asia and a 26% increase in retail, with particularly strong interest in China. Cushman & Wakefield’s report anticipated that Germany and the Nordic countries will attract low-risk investors, London and Paris offer good medium-term growth and that companies looking for high returns could be interested in Russia and Turkey, which is the MIPIM 2013 Country of Honour.

Levels of risk were a dominant theme of conversations in the MIPIM halls. “What has been striking this year at MIPIM is that major cities are using their low-risk credentials as a selling point to international investors,” noted François Ortalo-Magné, Albert O. Nicholas Dean of Wisconsin School of Business. “It used to be that the cities would sell themselves as exciting and dynamic markets, now the low-risk card is being played to the maximum.”

Risk appraisal, fund management, debt conditions and the general state of the real estate market were several of the topics discussed by leading institutional investors and representatives from pension and sovereign funds who attended the inaugural closed-door RE-Invest summit on March 6.

“The real estate market is fast-moving, extremely diversified and complex at the moment, with varying levels of investment opportunities around the world. We have launched RE-Invest to stimulate dialogue and an exchange of ideas between leaders from major institutional investors,” commented MIPIM’s Filippo Rean.

One factor that was concentrating minds at MIPIM was the availability of bank financing. CBRE’s Real Estate Investors Intentions survey summed up one major preoccupation of the market by noting, “A shortage of debt financing is seen as the biggest single threat to recovery of the property market in Europe.” Philip Cropper, Managing Director Real Estate Finance at CBRE said, “Across Europe we are seeing continual signs of lender caution. While institutions such as AXA and MetLife have made encouraging announcements in recent weeks, their increased presence will only go so far to replace the debt lost through the withdrawal of a number of established lenders to the real estate market.”

According to CBRE, investors are being squeezed between the difficulty of borrowing to buy the type of assets they want and the relatively high cost of borrowing when funds are available.

Ironically, Frank Khoo, AXA Real Estate’s Global Head of Asia, told MIPIM delegates that with this situation being replicated in China, opportunities are increasing for international investors to team up with Chinese developers. “Local Chinese developers are short of cash and this is an opportunity for international investors,” he said. Frank Khoo noted that high interest rates and a (recently relaxed) government requirement for banks to hold large capital reserves had put extreme pressure on Chinese developers.

However, with over 200 Chinese cities expected to have a population in excess of one million people by 2025, Cushman & Wakefield’s Managing Director Asia Pacific, John Stinson, said that this will translate into 200 major residential and retail markets in China.

Cities and sport drive major projects

With the MIPIM exhibition space extending around Cannes’ Palais des Festivals, there was no shortage of major projects on show this year, many of them city-driven or connected to major sporting events.

London’s Deputy Mayor, Sir Edward Lister, discussed the impact of the Queen Elizabeth Olympic Park with delegates. The massive development for this year’s Olympic Games has so far generated €14.9 billion in investment.

Among the new projects unveiled during MIPIM was the proposed Skolkovo innovation city in Russia which is promoting itself as a Silicon Valley equivalent. Set to welcome some 45,000 people and be completed by 2015, Skolkovo has been set a target of 50% energy consumption coming from sustainable sources.

In the giant Krasnodar Region tent, delegates admired huge models of the Sochi Olympic Park, which includes a proposed Formula One race track and which stood alongside a mock-up of the 83-hectare Gorod Sporta multi-functional sports complex which includes a 50,000-seat soccer stadium.

From Italy, Rome’s ambitious Ostia Waterfront development drew plenty of interest. Mayor of Rome, Giovanni Alemanno, told MIPIM delegates that his administration is committed to facilitating investment in the Italian capital with a new development agency and the upcoming launch of a strategic development plan. He said that a new quality charter to standardise development procedures “will help investors directly and also improve the climate for investment.”

March 7 saw the arrival of France’s Minister for Urban Affairs, Maurice Leroy, to support the gigantic Greater Paris project, which includes 140 kilometres of new subway track linking towns around the Paris region, as well as 70,000 new residential homes per year through 2030. Underlining the approach of construction work - after years of discussion around the project - the Société du Grand Paris attended MIPIM for the first time. The public body’s mandate includes responsibility for the Grand Paris Express subway and transport infrastructure.

In the north of France, attention is turning to Calais and its Calais Premier logistics project, designed to be an integrated motorway-railway hub with warehouses, ultra-rapid train unloading facilities and a business park. Calais Premier was one of a series of logistics projects, including Barcelona’s and Marseille’s development of logistics facilities around their respective port operations, that featured in MIPIM’s new Industrial and Logistics Pavilion. “Industrial and logistics real estate is attracting more and more industry professionals. Efficiency, functionality, flow-optimisation and land use are key issues for this sector and will be discussed throughout MIPIM,” said MIPIM Director Filippo Rean.

Qatar nurtures sustainable debate

Qatar may be one of the most active investors in the international real estate market with over 50 projects in 30 countries worth an estimated €30 billion, but at MIPIM 2012 the Gulf state’s focus was firmly on sustainable urban development.

In the eye-catching, two-storey Qatar Pavilion, which brought together Qatari Diar, Msheireb Properties and the Lusail Real Estate Development Company, delegates flocked to the Qatar Urban Forum, a two-day series of keynote addresses and panel discussions on ‘Sustainable Architecture and Urban Development.’

Opening proceedings, internationally-renowned architect Lord Richard Rogers told his audience, “The most important change of my lifetime is the recognition of the importance of the environment.”

Among the ambitious projects on display in the Qatar Pavilion was Msheireb Properties’ Downtown Doha development, designed to modernise the historic part of Doha while respecting existing heritage and sustainable urban development criteria.

“We’re showcasing Downtown Doha here because it tells another story about Qatar,” said Omar Saudi, Msheireb Properties’ Director of Marketing. “We think it shows a thoughtful approach to development and the Urban Forum underlines Qatar’s commitment to sustainable development. Msheireb Properties hopes that Downtown Doha will act as a blueprint for future downtown development around the world. It’s important for people to understand that when we approach a project, the first question we ask is whether it adds value in the widest sense of the term and not just financial value. We’re talking social value and value for the country.”

Sustainability was a central theme of MIPIM’s inaugural Building Innovation programme, showcasing pioneering initiatives that enhance the value of real estate. “To ensure a better return on their investment, companies today need to consider more than the purely financial management of their real estate portfolio. Buildings now have to be constructed with the idea that they will have several tenants during their lifetime and those tenants will have different requirements. Functionality, ease of use, adaptability and sustainability are now key elements of real estate building and asset management. The Building Innovation programme addresses this and spotlights some great initiatives,” concluded MIPIM Director, Filippo Rean.