This year was MIPIM’s 30th anniversary. With Savills employees from the UK to Mexico attending the conference, we take a look at what people in the industry are saying:
Global capital will continue to find a home in real estate
Whereas there was an abundance of debt in 2006, at this stage of the current cycle there is an abundance of equity. London, for example, is currently seeing investment volumes of around £20 billion per annum, compared to £15 billion in the last cycle. 2018 saw €60.4 billion invested in German commercial property, breaking the €60 billion barrier for the first time.
It was also a record year for Poland with a total volume of over €7.2 billion. The challenge for investors is finding asset classes that will deliver rental growth over the next five years. As we grow used to operating in uncertain times, investors need to focus on the structural changes in property that create opportunities for growth, particularly where upward trajectories in markets will prove resilient against any wider downturn. Examples of this include the rise of e-commerce, ageing populations and global urbanisation.
New faces at MIPIM
Egypt was at MIPIM for the first time with a huge pavilion and has signed a contract to return until at least 2022. With a population approaching 20 million, Cairo is the most populated metropolitan city in the Middle East and set for further growth.
A new joint venture between Savills and Egyptian company Sphere, announced at MIPIM, will take responsibility for the management, agency and marketing of the mixed-use development Arkan, which is located in West Cairo, by May 2019. The development is undergoing significant expansion, with construction on track to be completed in Q1 2020.
Once completed, the project will cover 260,000 sq m and feature 210 shops, 67 restaurants, a 185-room hotel, 600-seat theatre and 47,000 sq m offices.
There are still 5%+ yields available in some European countries
Falling expectations of interest rate rises will continue to attract capital into European real estate as borrowers are able to access debt cheaply. The European composite prime CBD office yield hardened 11 basis points (bps) to 3.7 per cent between January 2018 and January 2019, still providing an attractive yield spread of 250 bps over the cost of long-term debt.
Investors looking to achieve higher yields could look for core+/value-add opportunities in the Nordics and south Europe for offices, secondary cities in southern and eastern Europe for logistics, the UK and Spain for retail and southern and central Europe for purpose-built student accommodation opportunities.
UK continues to attract foreign investment
The Westminster parliamentary debates during MIPIM made for interesting daily viewing but it’s undeniable that the UK continues to be seen as one of Europe’s powerhouses for real estate investment given the diversity of asset classes and regional markets, attracting opportunistic, long-term and development investors alike.
For example, overseas investment into UK hotels hit £3.4 billion in 2018, the highest level since 2015 (£4.3 billion), accounting for just over half of the total £6.6 billion invested in the sector. More than £60 billion was invested in UK real estate in 2018 and turnover in the City of London in February 2019 reached £535.9 million – the highest turnover for the month since February 2015 – while £345 million was transacted in the West End office market.
Read more: MIPIM Matters 2019