08 March 2018

Paula- MIPIM 2018

Another year, another trip to Cannes for the world’s largest property event. With MIPIM 2018 just a few days away, I am sure everyone’s keeping their fingers tightly crossed that the ‘Beast from the East’ has passed and the sun will come out for us!

As always, there will be plenty of hot topics for attendees to discuss; among them, the thorny issue of continued uncertainty due to Brexit, the proposed capital gains tax changes affecting offshore investors in UK real estate, the continued rise of German cities as a destination of choice for capital, real estate being seen as a service rather than space, gender diversity in the sector and, of course, the fallout from the scandal surrounding the recently disbanded Presidents’ Club charity dinner.

For many, Brexit continues to cast a shadow over the industry in the UK, with 52% of respondents to the Smith & Williamson Real Estate Survey 2017/18 saying that they see Brexit as a threat. In a previous post I spoke of how the impending referendum had slowed the deployment of capital at the beginning of 2016, but that it thankfully picked up again toward the end of the year. Despite the Brexit threat, 2017 saw some of the largest transactions ever in the sector, with London trophy assets changing hands for sums in excess of £1 billion.

However, it is acknowledged that 2017 didn’t see much in the way of change to the status quo and negotiations with Europe have not substantially progressed. With the two-year deadline of March 2019 looming in the not-too-distant future, 2018 should at least see some conclusions being reached; whether that be ‘deal or no deal’. 

CBRE highlights migration and trade impacts as the most significant for the real estate sector. In particular, the fact that migration controls may lead to labour shortages, which means only one thing for the construction industry: higher build cost inflation (BCI). With BCI already running at extremely high levels, this will continue to put pressure on developers’ efforts to manage costs. If nothing else, the lack of progress in the negotiations is likely to mean a reprieve, if only temporarily, for the property industry.

Meanwhile, Britain’s loss is Europe’s gain as many flock to deploy capital into assets in Europe.  Germany secures four of the top ten cities in the PwC and Urban Land Institute ‘Emerging Trends in Real Estate: Europe 2018’ report. Meanwhile, JLL reported this week that annual investment in 2017 reached a high of US$60.2 billion, up 9% from 2016 levels. Germany has long been seen as a safe haven for capital, with an established reputation of political stability and a continually strengthening economy.

Germany is not, however, the only European country riding a promising wave right now: Ireland also continues to see significant GDP growth (forecast at 4.2% for 2018). Dublin, too, features in the top ten cities in the aforementioned PwC and Urban Land Institute report. Growth has also spread beyond the Irish capital, with Cork prime rents in office expected to rise some 10% in the next 12 months, according to CBRE. All in all, the immediate future looks bright for Irish commercial real estate and we have seen a number of our clients acquire assets in Ireland.

I also expect there to be a number of discussions at MIPIM around the changing face of real estate; the move towards space as a service. A number of our clients operate assets within the alternative sphere: purpose-built student accommodation, private rental sector (PRS), healthcare and hotel assets. And, although these assets are operated on a global scale, the theme of ‘space as a service’ is consistent across those markets. End users demand more from their space, with concierge services prevalent in PRS, courier collection services, shared living spaces, and the teaming up of service providers with developers (such as the Moda Living and Uber partnership). It will be interesting to hear others’ views on this emerging trend. 

International Women’s Day, which happens to be today, will also bring with it further discussions around gender diversification and pay gaps; topics that are as relevant in the property sector as any other. Groups such as the Association of Women in Property and Real Estate Balance have been vocalising the need for broader gender diversification in the real estate industry for many years. It is encouraging to see more and more female peers attend the event each year, as well as many industry peers (of both sexes) speaking out against misconduct in the industry. I, for one, believe progression is to be celebrated as the industry starts to proudly embrace the role that everyone has to play in this ever-growing, ever-changing sector.

I look forward to seeing you all there – please get in touch if you would like to meet up.

Paula Thompson is a director with First Names Group and part of our international real estate team. Paula specialises in structuring for the acquisition, development and holding of commercial real estate across a wide variety of property classes.

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