MIPIM Conference Sounds Optimistic Notes for CRE’s Global Future

“People feel they’re past the worst of the surprises … the bad is now priced in,” said Aaron Block, managing partner of proptech venture capital firm MetaProp. “People are trying to find the pockets of opportunity.”

Block was far from the only person out of the 21,000 people who attended MIPIM to share that sentiment. Alex Foshay, head of international capital markets at Newmark (NMRK), said during a Tuesday panel that commercial real estate is finally at “the start of the healing process.”

And that positivity hadn’t really been felt on European shores since the pandemic started in early 2020. Wouter Truffino, the CEO of Global Proptech, said that attendees at a convention just six months ago in Germany had a much more dire outlook on the real estate market. (Maybe it’s the sunshine of the South of France that put everybody in a hopeful mood?)

As investors finally get used to the “new normal” of real estate, some are gearing up to pounce on deals, said Jules Barker, associate partner of real estate at McKinsey & Company’s London office.

“The more sophisticated players are saying ‘There are opportunities, let’s take them,’ ” Barker said. “An end is in sight. They’re sharpening the pencils.”

Aside from the location’s sunshine and coastal views, attendees at MIPIM said the hopeful mood was linked to the Federal Reserve’s indications the U.S.’s central bank won’t raise interest rates this year and could potentially make some cuts.

Other central banks around the world are expected to follow suit, which will give investors a handle on where the valuations for different assets will actually end up.

“It does feel like inflation is largely in check and the Fed has the ammunition it needs to certainly stop raising interest rates,” Michael Lascher, a Blackstone (BX) senior managing director and global head of its real estate debt capital markets, said during a Wednesday panel. “With that backdrop, we should start to see real estate values bottom out and hopefully be on our way to recovery.”

Though there was a lot of hope being sold on the panels, relatively few assets globally have started to change hands.

“The result has been an increase in optimism, but not a significant increase yet in terms of actual allocation of capital,” Struan Robertson, chairman of real estate, gaming and lodging for Bank of America (BAC) in Europe, the Middle East and Asia, said during a Wednesday panel. “We’re not there yet but we’re on the right track.”

Barker heard it would be late 2024 or early 2025 when the spigot would open and deals start flowing at levels comparable to before interest rates rose, something echoed by many others during the convention. Still, others gave the industry a slightly longer runway.

“We’ve heard the saying ‘Survive until `25,’ and now people are like maybe it’s until `26,” Kalin Bracken, the head of real estate for the World Economic Forum, said during a Thursday panel. “So [people are] starting to understand when that pricing is going to adjust.”

While nobody knew exactly when deal activity would really pick up, it became pretty clear what asset the money was leaning toward during 2024: data centers.

“Data centers weren’t in [real estate’s] four main food groups [office, retail, industrial and multifamily] just a few years ago and, for those that have enough capital to invest in it, it’s certainly an exciting asset class,” Molly Goldfarb, the head of debt capital markets for TPG Real Estate, said during a Wednesday panel. “There’s a lot of growth potential coming out of the data center space.”

Part of the reason for that potential comes from the raw computing power needed for the growing artificial intelligence market. People at the convention were excited about the prospects of what artificial intelligence could bring to real estate sectors but weren’t yet exactly sure of the uses for the industry.

Even if the office market was considered a “four-letter word” to some during the convention, there were still those who believed the right office asset could be very lucrative in the current market.

“They over-generalize about a sector, when in fact there are always pockets of opportunity, which we see very clearly in New York right now,” said Dean Shapiro, the global head of development for Oxford Properties. “If you have the courage to be a contrarian, but see things clearly and you have the guts to bet on the future, you can make real money.”

If there were two words you could’ve expected to hear during any conversation or panel at the convention this year, they were “inflation” and “geopolitics.”

“I think everybody’s talking about inflation and the geopolitics that are coming into play and trying to see what’s the next step for everyone,” said Marinos Giannopoulos, the CEO for Greece’s official investment agency, Enterprise Greek. 

And the Fed’s efforts to fight inflation didn’t win praise from everyone at MIPIM.

“They had to fight inflation and they deemed real estate as collateral damage,” Mark Rose, CEO of Avison Young, said during a panel, adding it was the worst cycle he’s seen in his 40 years in the business. “For the first time, government and central banks are not your friends and they’re not behind you.”

Panelists said that inflation in Europe has largely been driven by geopolitical forces — including the war in Ukraine — and many worried how a second presidential term for Donald Trump would impact that.

On a more positive note, Joanna Frank, the president and CEO of the Center for Active Design, put what she saw as the main theme for this year’s event simply: “Women, women, women, women.”

“Women are the big trend,” Frank said. “Over 40 percent of the panelists are women.”

MIPIM said on its website that this year it made sure each panel had at least one woman speaking on it. And Frank said there’s been women-only events and even a WhatsApp group the attendees made to meet for dinner and network.

Nicholas Rizzi can be reached at nrizzi@commercialobserver.com.