As we describe elsewhere in this issue, many aspects of this year's MIPIM in Cannes were unusual, to say the least. The interest rate environment hovered over the Croisette like an alien looking for a landing spot, while below all the usual humanoids busied themselves running as usual from meeting to meeting. There was less lingering around after lunch in the numerous restaurants along the plage, but there was still plenty of agreeable hospitality, and lots of talking, which of course is what the MIPIM jamboree really is all about.
So maybe there weren't as many handshakes clinching lucrative deals this time around, but there still plenty of warm and convivial handshakes nonetheless. Cycles come and go, and everyone could sense how deep the current trough in the real estate industry is. And how the potential for a further downward lurch is eminently present. Still, the stiff upper lip was to the fore, and most participants will, we hope, have taken some bright moments home with them. The sunny weather certainly helped.
Here's a sample of opinions gathered at the fair which run the gamut from cautious optimism (actually, outright optimism by one company REFIRE spoke to, in an emerging new asset class which is putting the final touches to its German debut), to gloom and pessimism in some of the more embattled sectors, which may yet have to stomach further leaps downwards.
Curth-C. Flatow, CEO at Berlin-based alternative finance specialist FAP Group, took a sanguine view. "The defining question at MIPIM remains that about the level of current market values. If you talk to two valuers about the same property, you might get two very different figures. This of course also leads to discussions about the availability of debt. What is financed, what is not? As a provider of and advisor on alternative financing, we thus had many an exchange on this."
Kai Wolfram, managing partner at Engel & Völkers Investment Consulting, seemed keen for the industry to shake off its gloom and "get the lead out". "The mood at MIPIM 2023 was reserved. Complaints are understandable. But it is time for the industry to adjust to the new reality: New concepts are needed for properties acquired in recent years. The market price level has shifted, demand has also changed; for the first time in years there are investment opportunities in real estate again. This has been identified as a positive by many market participants and they are already working on new concepts – let's move on!"
David Tschörner, managing director at Red Square, a family-managed project developer in the Frankfurt and Rhine-Main region, was already looking ahead. "MIPIM confirmed our own deliberations on current trends: the market has moved away from being a seller's market. The era of rapid and successful transactions is over for the time being. In the future, the focus will lie on the quality and redevelopment of real estate. In a generally challenging market environment, professional competence and a deep understanding of the real estate market will prevail. Those who have done their homework in the past will also be successful in the future and able to seize opportunities. The industry meeting in Cannes was accompanied by bright sunshine – which buoyed our confidence even more."
Sander van de Rijdt, co-founder and co-CEO of building management software company PlanRadar, viewed the current crisis as an opportunity for developers to revamp their thinking about development planning. "MIPIM is back to its old greatness, the halls were full and there was a positive networking climate. Yet the mood was marked by great uncertainty. Above all, the interest rate hike, high inflation and the latest problems from the ranks of the banks are causing uncertainty in the industry. As a result, the further development of interest rates, the outlook for the current business year and the possibility of an emerging banking crisis were the most discussed topics at the fair. As always, some market participants simply do not want to acknowledge the changed framework conditions and necessary adjustments, others are already active, realising that change also brings opportunities.”
Sven Sontowski, managing director of Erlangen-based investor and developer Sontowski & Partner, shared de Rijdt's view about the importance of quality in seeing a way through the current thickets. "Little has changed since EXPO Real: The industry is still in a waiting position. For developments, I am of the opinion that if the quality and sustainability are right, a good product will find its buyer at the right time, we just have to roll up our sleeves and work in partnership-like ways."
The property managers are literally making hay while the sun shines. As Dirk Tönges, managing director of MVGM Deutschland put it: "The sun in Cannes made up for the subdued mood. As property managers, we are less stressed than other market participants – smaller margins also entail a smaller risk!"
Christian Vogrincic, founder and CEO of Munich-based developer CV Real Estate AG, was inclined to pragmatic musings. "The discussions at MIPIM reinforced the impression that the real estate industry is facing a turning point. Following the sharp rise in interest rates, real estate is now only one asset class among many for institutional investors. For office properties, rents are going up and factors are going down, the residential market is dead – and in general, if you don't have to sell, you're not selling at the moment."
Daniel Wolf, managing director of alternative investment fund provider AIF Capital in Stuttgart, was also grappling with managing expectations for the year ahead, but remained optimistic. "While the situation is challenging overall, sentiment remains positive. We expect to see only sporadic transaction activity in the first half of the year, and the year as a whole will be down compared to 2022, but we are also convinced that opportunities will arise. As specialists, we are set to benefit from this, especially since the health care sector is in focus internationally.”
Also looking for the silver lining after the several tough years of the COVID pandemic was Andreas Ewald, managing partner of Engel & Völkers Hotel Consulting. "Challenging times always provide for opportunities. The classic hotel industry is undergoing a major transformation. New operating models and digitalisation strategies are being established, hotel and residential use are blurring, cost pressure and an increased sense of responsibility make the sustainable use of resources imperative. The hotel operating crisis has largely been overcome. The leisure hotel industry is looking forward to a strong summer. The world is travelling again and turnover expectations are rising accordingly. We see equity-strong investors who are reflective and focused, taking opportunities. A good understanding of both hotel operations and real estate is now more important than ever. MIPIM has shown how important and essential personal exchange is."
Among those pitching opportunities outside of Germany was Dr. Patrick Adenauer, managing partner of Cologne-based, US-focused German American Realty. "The strong reluctance of financiers was intensively discussed at the fair. However, it also became clear that viable real estate concepts with reliable, competent partners remain financeable. Many are turning to US residential investments because it provides interesting growth regions and high economic dynamics. Tenant demand for housing remains high. This applies to the growth regions of Germany as well as the US."
