Property in bright mood as sun shines on MIPIM

EDITOR’S COMMENT Love it or loathe it, MIPIM always gets the market buzzing. There may have been some discussion about whether the Covid years and real estate’s growing conscience would mean the end of the global gathering in Cannes, but as I rolled into the event, slightly weather beaten and weary from the annual Cycle to MIPIM, it was clear that MIPIM was anything but dead. A touch of warmth and some bright sunshine is always enough to bring a brighter disposition to almost anyone, but from conversations the EG team has been having at MIPIM, property is back in talk-it-up mood.  Investment – bringing it in and paying it out – has been high on the agenda. Some 6,000 international investors are in Cannes, with 76 of the top 100 investment managers in attendance.  There are big global sovereign wealth funds here, eager to find somewhere to place their still huge allocations to real estate – as EG revealed in its Global 100 index last week, the top 20 SWFs have a whopping $375.4bn (£311bn) to pump into property.  The fund managers are here, scoping out where the opportunities lie. And – spoiler alert – everyone is talking about stranded assets and the new rules on EPCs coming into force next month.  As revealed through an EG investigation in September last year, almost £2.5bn of rental income is under threat if owners of commercial real estate that is not up to scratch fail to boost their EPC ratings above an E ahead of this year’s deadline. From 1 April, buildings that do not have an EPC rating of E or above will not be able to be traded or leased under new government regulations. This rises to C in 2027 and B in 2030. EG’s exclusive Radius data, coupled with EPC figures, found that some 120m sq ft of commercial real estate – the equivalent of 199 Shards – across England will have failing EPCs from next month. This rises to 257.2m sq ft of commercial real estate in 2027, putting some £5.3bn of rent at risk, and 413.2m sq ft in 2030, with the rent at risk growing by almost two-thirds to a whopping £8.5bn. Savvy investors are starting to take notice. And while some are pushing out stock that they know will be stranded and potentially too costly for them to make fit for purpose, others are building funds to take advantage. As revealed by EG this week, PGIM is one of those investors. It has some £700m to spend on stranded assets and believes that it can take advantage of the distress that other property owners will face. “It’s going to be a busy year,” head of UK investment Charles Crowe told EG. “We will see an element of distress from property owners – which we, to be brutally honest, can take advantage of. We see the core-plus and the value-add fund as an incubator, so we can buy it, sort it, re-engineer it and sell in two years.” It is inevitable that as the sun shines in Cannes and 23,000 people from around the world gather to talk about the market, they are going to talk it up. That is MIPIM. In the decades I’ve been coming here, there has been only a handful where the mood has been a touch sombre. The change in attitude feels a little like the change in weather from the UK to the South of France. When I left on 8 March, snow stopped us cycling. We were then battered by high winds and torrential downpours. The sun only started shining when we reached the outskirts of Cannes. There’s a metaphor in there somewhere. There is still stress in this market. Deals are still incredibly difficult to get over the line and those of us at MIPIM need to remember that when we return to a drizzly reality. But for now, if the sun shines on opportunity, then why not bask in it? To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews