The annual Mipim conference in Cannes, the largest global real estate meeting, gets underway on Tuesday at a critical time for real estate as participants seek clarity on issues such as the future of the office, and whether recent tentative signs of recovery can be sustained. An ever-more international audience will be asking, is 2024 the year interest rates begin to fall back and markets get moving again?
The gathering is taking place through Friday and coordinator RX says at least 22,500 delegates have been confirmed from over 90 countries. That will be a mix of advisers, consultants, investors, bankers, lawyers, journalists, public relations advisers, politicians and public sector workers all jostling for a big deal or story and all out to promote their country or city or region or development. So there is a lot of explaining to do, and attendees need to be quick and memorable.
While the conference is once again a fixture at the Le Palais des Festivals conference centre on the French Riviera after the pandemic shut down the physical event for two years, it has had to adapt and change.
First, delegates will be looking again to see how much progress has been made in making the event more diverse and inclusive. There has been a clear drive to make panels, representations, teams, bars and restaurants less the preserve of middle-aged businessmen. Social media and other platforms have been increasingly active in skewering companies that are not doing their bit. A good example is the MipimLads twitter account which wittily highlights the lack of female representation.
Real Estate Balance, the group that lobbies for more diversity in the industry, is hosting a number of events including a diversity, equity and inclusion networking gathering on Tuesday, an informal networking event for first-time attendees and up-and-coming property professionals on Wednesday and its presentation on Thursday of the industry's response to the Real Estate Balance NextGen survey 2023 results. At the latter it has managed to get Europe's leading advisers to put aside competitive hostilities, including JLL, Knight Frank and Savills.
Sue Brown, the managing director of Real Estate Balance, says she has been lobbying for gender equality throughout her 40-year, property career and the industry has come a long way. "Gender diversity is now a critical part of corporate reporting and an important feature of major industry events like Mipim and UKREiiF."
Real estate still had a gender pay gap of 9% in 2023, she points out. "What’s more, the results from our most recent industry-wide survey [of DEI in the sector] show that the gender gap between middle managers and senior leaders has not only persisted but worsened since our very first survey in 2016."
There is no doubt environmental, social and corporate governance concerns will be a focus, particularly as Mipim and other global events wrestle with the irony of debating sustainability while thousands of people jet in from around the world. The event coordinators are introducing innovations, not least a special train from Paris to the conference, but their argument remains that the event stands or falls on the business that gets done by delegates so that other international travel can be scrapped.
Rajit Dass, senior vice-president at Round Hill Capital, says ESG-led value-add strategies will be in the spotlight. "Will traditional core equity investors embrace higher risk or shift towards real estate credit and infrastructure? Given the active management demands of driving ESG improvements, hands-on management becomes critically important."
Ear to the Ground
As well as monitoring the trends and news being discussed, delegates will of course be trying to promote their interests and do deals.
David Sleath, chief executive of Segro, the United Kingdom's largest real estate investment trust, will be finding answers for the challenges facing his principal focus: industrial and logistics. "Mipim could be quite interesting this year because we are at such an interesting point for conversations. We have a team out there and we will be checking the mood of the wider investor base. Two things we are focused on are enabling the logistics sector to be a real contributor to decarbonising, and also we will talk about planning. In the desperate desire to solve the housing shortage are we creating another problem by turning everything on brownfield land into blocks of flats?"
Christopher Mertlitz, head of European investments at US net lease specialist WP Carey and a veteran of the conference, says it is "crazy" how quickly it has come around again.
"This year, the expectation of a lot of sellers is that we will see some swift base rate cuts and a reduction in the cost of borrowing which is such a key driver for this industry and particularly in the net lease space, where long-dated leases act as quasi-bond type instruments. But the fact is that positivity is being eroded by contrasting views that this rosy outlook might not be the case."
Mertlitz was speaking as the United States inflation numbers appeared providing an uncomfortable jolt in expectations.
"This will be a key feature of any discussion at Mipim as it is the biggest driver for the industry. There will be a lot of talk about the general state of the economy though and from my point of view how global supply chains are changing with the key words for logistics being reshoring, nearshoring, all these types of shoring."
Mertlitz says politics will be important with global elections looming. "A big discussion point will be around the upcoming" United States election "and most importantly what that will mean for European security given the Ukraine-Russia conflict."
But WP Carey has its own agenda, advocating the net leases that it focuses on. "Our investment thesis has not changed in more than 50 years so there are no huge surprises about what we will try to get from being at Mipim. It is really an increased awareness of sale and leaseback as a form of capital raising for companies. This year is very exciting to be in this space. With interest rates rising the borrowing spread companies have to pay on top of the base rate has changed dramatically. It has increased the cost of capital for businesses. At the same time the bond markets for raising capital have virtually shut down. So we want to make sure that people are aware that recapitalising via sale and leaseback is more viable than it has ever been."
James Chapman, head of EMEA Capital Markets as Cushman & Wakefield, is looking forward to the conference.
"The environment has certainly moved on this year in terms of predictability and price discovery. Regardless of whether you are a buyer, a seller, or a lender, you are now able to make conscious, proactive decisions and do so with comfort around what to expect on execution."
Chapman says the temptation to "wait and see" has hung over the market for a prolonged period. "Thankfully we’ve moved beyond that now into a window of opportunity. You can see the effects in an increase in off-market discussions, new pitches and successful on-market processes now happening. We are confident this gathering momentum in the market will now be sustained."
Chapman says he will be spending time with buyers that are now "actively deploying again as well as new investors who are hoping to steal a march on some more established names that are still to find their feet in the new cycle".
John O’Driscoll, global co-head of real estate, AXA IM Alts, says the conference is always a good opportunity to find out up-to-the-minute trends and innovations. He is expecting access to debt to dominate conversations, with a big opportunity emerging for alternative lenders. "There is a question mark as to how long these attractive rates of return will prevail, but there is little debate around the role and potential for the growth of non-bank lenders, which has increased consistently since the previous financial crisis."
Gordon Milnes, head of real estate syndication, Investec, agrees everyone will be discussing whether the green shoots of a recovery are sustainable. "Then there’s the related question of how quickly, and when, interest rates will start to fall. The challenge for central banks is how they handle sticky inflation when underlying economic indicators are looking negative.”
Hammerson chief executive Rita-Rose Gagné says the biggest talking point has to be understanding how real estate sector responds to a time of change. "As we look forward positively in terms of the economy we are going to be focused on how liquidity behaves for the real estate sector."
She has been invited to a lot of events and meetings around diversity and ESG. "I am passionate about these subjects so that is good."
Mipim often starts with a feeling of déjà vu. Investec's Milnes points out for instance: "It was a key agenda item at Mipim last year, and 12 months on we don’t seem to be any closer to solving the riddle that is the future of office. We are seeing continued divergence between best-in-class assets and outdated ones that are moving increasingly out of favour.”
But there also hasn't been the expected wave of distress. “Partly as a result of continued lender forbearance, we haven’t seen distressed assets come to market in the way that was expected. The expectation is that things will come to a head in 2024, creating challenges for some and opportunities for others.”
Andrew Coombs of Sirius says the market has had a decade of working with an unrealistically low cost of debt, so companies produce most of their returns from the arbitrage between borrowing and yields rather than operating their assets.
But as traditional lenders continue to retrench, corporates are having to turn to much more expensive, alternative options, and that is creating distress in some markets. He says "space as a service" has never been more important and Mipim should see "plenty of value-creation opportunities for businesses that keep their costs under control, maintain close relationships with customers and lenders," and use strong asset management platforms.
Often, expectations about the real estate conversations that will take place at Mipim are upended by geopolitical or economic shocks. Last year it was the collapse of Credit Suisse's share price, the prior year the Russian invasion of Ukraine.
This year, the United Kingdom government's Budget, laying out its spending plans, took place before Mipim rather than during it as it typically the case, but it was lacking in needle-moving announcements for real estate this time.
What's On?
So who is attending and what is being presented in 2024?
The conference is well-represented across all areas of European real estate. Pretty much all of the leading global advisers and consultants are in town, but RX, the organiser, points out that one-third of Mipim's delegates are investors including major global names such as Australian Superannuation Fund, which just announced a £8 billion of investment in the United Kingdom, the Canada Pension Plan Investment Board, Blackstone, Pimco and Zurich Insurance.
In a closed-door event to which invitations are presumably rarer than hen's teeth, the 'Re-Invest Summit' on the opening day sees representatives of the world’s largest sovereign wealth funds such as Abu Dhabi Investment Authority, GIC Private Limited, Investment Corporation of Dubai, Korea Investment Corporation, Oman Investment Authority, Qatar Investment Authority and Singapore's Temasek discuss investment strategies.
For the first time, in partnership with Co-Liv, Mipim will host a half-day summit called ‘Housing Matters' that focuses on sustainable housing solutions including single-family housing, student accommodation, build-to-rent and later-living, taking place on Monday.
Nicolas Kozubek, Mipim's director, says global economic uncertainty means the event is more important than ever for public and private stakeholders looking to source investment for building and regeneration projects.
He points to a strong presence from political figures, this time including Sanna Marin, the former Prime Minister of Finland, who will open the conference with a keynote speech, and Klara Geywitz, German federal minister for housing, urban development and building.
Alongside major European cities and regions, there will be delegations from the United States, Canada, Oman, Saudi Arabia and Hong Kong hoping to drive investment into their area.
France, then the United Kingdom and then Germany are normally the biggest attendees but more and more countries are in attendance, with Asia, in particular, increasing its attendees.
From the United Kingdom there is political representation from Lord Johnson, the investment minister, and Lee Rowley MP, the current housing minister.
For the United Kingdom, there has been much to play for in recent years, as the world still wants to understand the implications of its Brexit split from the rest of Europe.
Matthew Leguen de Lacroix, head of business development EMEA for SIOR Global, the representative body for real estate brokers, thinks the conference will be "dynamic [...] as the industry continues to transform and our members remain keenly interested in front-line insight on market trends – a key driver to attend the event."
He adds that in conjunction with Mipim's emphasis on a global festival, there is also more interest from American SIOR members to attend. "The market becomes ever more global and Mipim remains a great place for making connections as well as a forum for sharing ideas and innovation so the real estate industry can continue to evolve.”
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