Real Estate market weather forecast: Sunny with occasional showers
April 20, 2016
It was easy this year to draw parallels between the weather at MIPIM, the 4 day real estate event in Cannes, and the mood at the conference. Similar could be said of the real estate panel discussion I hosted at our recent European Bank Restructuring Conference. It rained heavily on the second day of MIPIM and there were long faces and wet shoes.
The conventional wisdom that capital is nervous and transactions are stalling has some evidence to back it up. There are examples of large portfolio and corporate real estate transactions that have failed to reach price expectations and there is no doubt that global capital is wary of macro events impacting the real estate market. It is inevitable as we reach the top of the cycle that these types of deals will become tougher.
But by the last day the sun was shining again and capital markets are fickle creatures driven as much by confidence as by fact. At the smaller end of the property transactions market the signs are still good with plenty of equity placings and merger and acquisition (M&A) activity. Select European markets are still prospering and the UK market looks okay. There is rental growth across all asset classes including real time proxies like hotels and no sign of interest rates rising materially.
So the market fundamentals are still strong though my advice would be to bring a BREXIT umbrella.