Three cheers for MIPIM (or maybe two)
Our Mike Scott and Alisa Sweeney (from our real estate team) spent an interesting few days in Cannes at MIPIM. It was certainly more positive than previous years with much talk of releasing the value of existing commercial and retail space by converting it into residential accommodation. Whilst there was an inevitable obsession with London, one could not help but be concerned about the number of residential developers who are looking for a site (any site) in central London or even within the M25. There was an air of desperation about the enquiries which causes one to speculate as to whether the clamour for residential development will lead to some mistakes being made. The banks were in Cannes purporting to be open for business on favourable terms. And the established funds and all manner of private equity were offering reasonable mezzanine finance. Whilst plugging the gap between the sale price and affordable funding remains a problem, the main issue appears to be the shortage of viable opportunities. Most frustrating.
Never to be outdone by the lack of opportunities, the canny investors are looking at alternative property investments such as storage, student accommodation, energy, hotels and the possibility of converting everything to resi ! Those with buying power are a demanding lot ; still expecting the best locations with long leases and high returns but there are others who are not so fussy. And there is no doubt that the inward investor is back. Both US and Asian investors appear to have found their appetite for London once again this year – and some investors are beginning to focus on other cities ; Manchester, Leeds, Bristol and others.
In summary, if MIPIM is anything to go by, we should be cheered by what seems to be confirmation of London’s claim to be the real estate capital of the world. This has positive implications for other UK cities as investors realise that many of the positives that apply to London property also apply to property in other major cities. No one believes that the recovery will be quick or dramatic ; but most at MIPIM believe that it has begun. From their meetings with investors, developers, agents and other property professionals, Mike and Alisa derived a sense of renewed optimism.