Whether or not you go down in a supercar rally, hire a yacht or throw a big party, going to MIPIM is about putting on a show of bravado. No-one will tell you that business is struggling; everyone will tell you that things are looking positive. It is the same whether you are in the throws of a boom, the pits of a recession or, it turns out, teetering uncertainly on the edge of a Brexit abyss.
No one knew quite what to expect of this years’ property pilgrimage to Cannes, and whilst the events were (on the whole) a little less lavish, the mood was generally positive. From the conversations we had with other investors, agents, and developers alike, the general consensus was that people weren’t overly concerned about either the global economic outlook or the impact of Brexit on the UK market. The latter may have just been out of sheer boredom with the whole thing though.
For all the positivity and bolshiness however, it was hard to make out who was actually getting deals done. Most people we spoke to were in agreement that prices are too high across every market at the moment. The feeling is very much that loose monetary policy has created a situation where there is a wall of money chasing the same limited stock. Competing for investment opportunities is tough, unless you are afforded the freedom of leading the pack with the highest offers for the best assets, or willing to be drawn to riskier assets and locations due to the pressures of needing to meet IRR (internal rate of return) targets.
Historically, it is at these times that you could expect a shock to arrive that would trigger significant downward pressures to send prices spiralling and open up opportunities for more investors. These aren’t normal times though and the macroeconomic outlook is currently very precarious. Up until the end of 2018, we had assumed that the trigger point this time around would be an increase in interest rates, but we are no longer so sure and nor would it seem was anyone else out at MIPIM.
A significant fall in prices just doesn’t seem to be on the cards right now, so like many of our peers who went out to MIPIM eager to source a deal, we will sit tight, whilst continuing to look for good value-add opportunities in prime, central locations.