MIPIM 2018 Review: Promising with lots to look forward to

1) The UK is still attracting a lot of investment – Foreign investment in London real estate was up 16% on last year and this is set to continue. But London was not the only focus and opportunities across the UK in regional cities such as Birmingham and Manchester were firmly in the spotlight.

There are still many concerns around the issue of affordability, especially in London, but it does not seem to have put off Asian investment, particularly from China, Malaysia, South Korea and Japan.

2) Brexit is less of a consideration – Despite the constant murmur around the conference halls, Brexit is not putting people off and dampening spirits in the same way that it was a year ago. In fact, 18 months on from the initial decision, the UK is still seen as an attractive investment proposition. In fact, a recent Savills report revealed that commercial property investment in the UK saw a 66% increase in January compared to the same month in 2017.

In the immediate aftermath of the Brexit vote, many investors and corporates looked to other European markets such as France, Germany and Spain. But over the last year, it has become apparent that the UK still offers good yields and is also considered by many to be one of the easiest regulatory environment to do business.

Brexit aside, UK politics was still high on the agenda, with many claiming that a Jeremy Corbyn government was “the single biggest threat” to the UK’s property industry. Much of this was due to the perceived lack of foresight into what that particular future scenario may bring. Regardless, it was a hot topic of conversation in Cannes.

3) There is uncertainty in the residential sector – Despite years of negative performance from the London high-end residential market, the mid-level (£300k-£500K) has been performing well, and investment and demand has been good. But the mood is starting to change. With the huge investment that has gone into the mid-market over the past two or three years, many believe we have reached a saturation point where supply has now outstripped demand in certain areas, and that may lead to a significant correction in prices at this level.

Our residential team has still remained active in what is generally considered a difficult market, advising a number of high net worth individuals, family offices and private companies.

On the other hand, affordability has fuelled a clear increase in the number of conversations around PRS investment schemes (investment in this sector is expected to reach £50bn+ by 2020), especially in London, where there is still a huge demand for rented accommodation. Our construction team advised Telford Homes in its agreement with US-based developer Greystar to build 894 build-to-rent homes in London last year.

4) Commercial Real Estate (CRE) continues to flourish – Over the last year, the CRE market has continued to flourish, performing better than even the most bullish of expectations. This has been good news for both domestic and overseas investors. Our commercial team have continued to advise investors on a number of midmarket transactions in the last 12 months, most recently advising PPR Streatham on a £23.3m sale.

With the retail sector currently struggling due a number of reasons, many believe that there is a need for more innovation and diversification in order for UK property investment to maintain its appeal on the global stage. One area that is being much talked about is hotels.

Hotels can provide significant investment diversification by providing a revenue stream and operational model that is notably different from the traditional property investment vehicle. If managed and run properly, like all property assets, hotels can provide a very good return for investors. In addition, as they have a completely different risk profile, they will attract new investors who may be more comfortable with what they have to offer as an asset.

5) Diversity is still a big challenge – Property is widely regarded as one of the least diverse industries. It still has a huge male domination with an estimated 85% of the property and construction industry workforce being male. There has been some improvement, but there is agreement across the industry that much more needs to be done.

Corporate diversity is a hot topic at the moment and it was singled out by many as arguably the biggest challenge the industry faces today. Many of the conversations revolved around how to not only attract more women and ethnic minorities, but also how to address behaviour in the workplace.

If you have a project would you like to discuss with one of our Real Estate team, please get in touch using the details below. For further information, please visit http://www.memerycrystal.com/what-we-do/real-estate/.