March has been a turbulent month for the global economy in recent years. The Russia-Ukraine conflict, the collapse of Credit Suisse and speculation around the severity of US trade tariffs have all cast a shadow.
So perhaps it was unsurprising that the property world appeared to be looking beyond recent events in the Middle East when it convened in Cannes last week for the annual Mipim conference.
“People are in can-do mode,” said Rasheed Hassan, head of global cross-border investment at Savills (SVS). “They are desensitised to shocks.” His employer’s surprise £685mn acquisition of investment bank Eastdil, which stole the show from afar the following day, exemplified this.
Whether this attitude persists should an inflation shock lead to sudden and stubborn interest rate increases – the industry’s number-one bugbear – remains to be seen.
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The conflict in the Middle East has at least shushed any murmurings of IPOs. The FTSE EPRA Nareit UK index has fallen by 10 per cent since the onset of the conflict, widening the sector’s discount to net asset value to around 25 per cent.
“IPOs are very difficult in the current market,” one senior banker told Investors’ Chronicle.
There were also few concrete signs of optimism about London’s office market, which is still awaiting the confidence signal of a large £500mn-plus transaction. Some agents were surprisingly candid when discussing markets away from the core West End and City of London.
“Uninvestable” is how one described Hammersmith, while another said areas such as Whitechapel and Aldgate, just east of the City, were “gone”.
The challenge for the likes of Derwent London (DLN) and Helical (HCL) will be to dispose of their properties in these areas at something approaching book value.
Land Securities (LAND) has also recently pulled the sale of a £200mn-plus office building in Victoria, according to Green Street News. The FTSE 100 real estate investment trust (Reit) has a broader strategy to reinvest £2bn of office disposal proceeds into retail and residential assets.
The boosterism surrounding the student accommodation sector was something of a surprise, given the well-publicised struggles of Unite (UTG) to fill beds and grow rents.
Several people at Mipim argued that beyond an oversupply in a couple of cities such as Nottingham and Sheffield, there is no broader malaise. Student accommodation bookings are tracking 11 percentage points lower than at the same time last year, according to a recent report from Sturents.com, suggesting otherwise.
The subject of AI was never far from discussions, not least because the UK’s data centre insiders remain bullish, despite concerns around power availability. Institutions such as Legal & General (LGEN) have launched funds in recent months to invest in the asset class.
There was, however, a surprising lack of nuance to disquisitions on AI’s implications for the wider industry.
This was despite the sell-off of shares in property brokers such as Savills, CBRE (US:CBRE) and JLL (US:JLL) just weeks earlier on fears over their businesses’ vulnerability to AI. Shares in office Reits Derwent and Great Portland Estates (GPE) also fell on concerns around AI’s impact on office jobs, and therefore demand for their properties.
Speculating on which asset classes are more or less vulnerable to disruption should only be the start of the debate. Yes, property is a people business and, yes, AI is an opportunity, but the range of potential outcomes is so broad as surely to be worthy of deeper investigation.