MIPIM, arguably the biggest property event in Europe, brings together influential players and experts from all sectors of the international real estate industry.
JTC will be sending four delegates from its New York, London, Luxembourg and Jersey offices.
Here, Dewi Habraken, Simon Gordon, Vincent van den Brink and Will Turner, discuss the current state of affairs and what to expect from the real estate sector going forward:
What real estate trends has JTC seen recently?
Prevailing uncertainty in global markets coupled with rising interest rates and a high inflationary environment have all come together to put significant downward pressure on asset valuations, which reduced the appetite to allocate to real estate amongst international investors.
That’s not to say that the sector hasn’t seen deals happen over the past twelve months – but those that have happened have tended to be smaller and highly targeted.
Where that has been activity, it’s tended to be the ‘core’ and ‘core +’ assets, where there is a strong and secure income generation element, or where sustainability credentials are high.
We are seeing significant interest in more operational real estate assets, particularly in the residential sphere, such as purpose-built student accommodation, built to rent and later living assets because of the superior returns these are able to generate when combining the investment and operational aspects.
Do you expect a change in the real estate market going forwards?
We anticipate seeing continued focus on ESG and sustainability space in real estate going forward. ESG thinking is already being integrated into investment deals, but with 2023 having allowed the opportunity to reflect, there has been a definite move in preference towards stripping properties down to integrate ESG strategies, rather than building from scratch.
That will be an interesting trend to watch going forward next year, and an area where we at JTC feel particularly well placed to add value, having focused considerably on developing our integrated Sustainability Services proposition over the past year.
How are you supporting real estate clients currently? Are there critical issues?
Generally, with no leverage and difficulties in refinancing, real estate deals of real significance have been hard to push through which has given investors an opportunity for a period of self-reflection.
Whilst that’s not necessarily positive from a short-term market perspective, it’s arguably not such a bad thing in terms of long-term platform-building.
We’ve seen that investors, managers and advisers have been showing a genuine desire to put the groundwork in now, collaborate on initiatives and come together with a longer-term view – so that when the time comes for them to press the ‘go button’, they are in a strong position to do so and move quickly.
In addition, we support real estate fund managers expanding activities into credit funds and are seeing increasing demand in this area of the industry.
What factors might influence the potential growth in real estate activity?
There will be a point when asset values are perceived to have bottomed out – and there is then potential in the market for opportunities. Interest rates beginning to consistently move downwards will help to ease pressure on valuations, reduce the cost of leverage and start to unlock deal flow. We are already starting to see early indications of this in the market as expectations for reducing inflation and a reduction in interest rates gather pace but there are still significant headwinds and deals are still very slow to complete.
When the market reaches a turning point, there will be competition for investment. Which is why it has been so important for managers to use their time now wisely while they can.
What are you hoping to achieve from MIPIM?
MIPIM is a great opportunity to meet and catch up with a huge number of people in the industry in a relaxed and enjoyable environment and we are looking forward to it to seeing new and existing contacts.
With so much turbulence in the Real Estate sector over the recent 18 months it will be very interesting to hear the latest in investment trends and analysis around what the future may hold. We hope to return from MIPIM with an understanding of where the market is likely to head as we continue to march forward into 2024.
Dewi, Simon, Will, and Vincent will be in Cannes for MIPIM between 12 – 15 March.
If you would like to arrange a meeting with them during the conference, please get in touch directly.
