The month of March, dominated by Mipim, tends to act as the annual barometer of the property market, a bellwether of sentiment for the rest of the year. However, can we extend this analogy to incorporate the entire property cycle?
Last year, Mipim was dominated by ‘Wet Wednesday’ and storm clouds certainly overshadowed the UK market. With the small matter of a referendum on EU membership, investment volumes were down and sentiment was marred by uncertainty, at least until the clouds began to disperse in the fourth quarter.
What a difference a year makes - Cannes was revelling in the sunshine, the mood similarly vibrant. Mipim was a hive of positivity and activity and the first of this year’s European elections, this time in the Netherlands, failed to produce another shock result that some had feared.
Using this year’s sunny barometer, can we argue that the positive atmosphere will be here to stay?
Having benefited from three days in Cannes, the industry’s spirit couldn’t even be dampened by the SNP and its perennial quest for independence. Perhaps if the Scotland stand had as much energy as Manchester or the West Midlands, the powers that be at Holyrood might recognise the power of one rather than independence.
The regional presence, so well fronted by Manchester, was impressive and had great momentum. UK cities are reacting positively and the growth of international capital into the regional markets is increasing all the time, with Middle and Far Eastern buyers almost doubling the amount of money they spent in 2016.
Strong international interest
Unsurprisingly, Birmingham and Manchester are witnessing strong international interest on all investment sales, development funding and residential projects, benefiting from strong infrastructure and global connectivity. In Manchester, 70% of all investment deals in the past 12 months have been done by international capital.
In terms of market activity, the key themes on everyone’s lips are Berlin, the PRS and the Cheesegrater, also known as 122 Leadenhall.
Berlin seems to be coming into its own. Global demand for its real estate is extremely strong, evidenced by the results of CBRE’s 2017 EMEA Investor Intentions Survey. Berlin jumped from fourth to second place in the rankings of the most attractive cities for investment in EMEA and three German cities were ranked in the top 15.
Berlin’s wealth of human capital provides a great incentive for occupiers but London remains the top destination for global capital.
PRS has long been the buzzword of the UK market. There are now more new entrants into a market that had been starved of product and operators. The ideas, capital and knowledge are all abundant but more land and expertise are still required. Fizzy Living has set a great benchmark in speed of delivery and operational quality, providing a catalyst for others.
The Cheesegrater - iconic, striking and exchanged. The epitome of a trophy deal in this cycle and a milestone for the industry. It is also a just end for British Land, which used overseas money to develop, resulting in a highly successful, not to mention, courageous JV.
What next? With an estimated £38bn of capital targeting central London real estate, the grapevine suggests more major deals will follow. It feels like we are set fair for a while - not just in the UK but further afield.