March 19, 2012
Faculty member of the Wisconsin Business Schoool summarizes key points and general reflections from MIPIM 2012.
In just a few years, MIPIM week has become one of the highlights of the MBA experience in the Real Estate Program at the Wisconsin School of Business. For five exhilarating days last week, our MBA students and I got a crash course on the inner workings of the global real estate markets and a chance to make invaluable connections with some of the most influential real estate professionals in the world.
Every year, our week at MIPIM is capped by the wrap-up address that Wisconsin School of Business Dean François Ortalo-Magné gives on the last day of the meeting. This is a crystallization of what we have learned in the course of five frantic days into a dense thirty-minute talk and offers to MIPIM attendees the opportunity to hear what we at Wisconsin consider to be key takeaways from the week’s formal and informal exchanges.
As seems to be the case every year, strong themes clearly emerged at MIPIM. First and foremost, participants are looking for signs that the crisis days are over and that investors are once again willing to accept some exposure to real estate beyond the safest, core markets. Investors also want to know which opportunistic markets will benefit the most from the recovery, if and when it comes. And they want to know what lessons, if any, the industry has learned from the crisis experience.
The broad sentiment at MIPIM this year is probably best described as “cautious optimism.” As bearish as they sound about their own markets, European investors appear remarkably bullish about U.S. prospects. And, yet again, they view 2012 as the year to begin looking beyond core markets such New-York City, London, and Paris. As participants seem well aware, these broad ideas are virtually identical to what transpired at the 2011 edition of MIPIM. In fact, there was a general sense among participants that 2011 amounted to something of a false start, with what appeared to be a promising recovery stopped in its tracks by massive, unexpected macroeconomic shocks.
A near consensus also emerged among institutional investors that the basic investment model in real estate must change in the wake of the recent financial crisis. Capital losses of historic magnitude have prompted large investors to question past practices, demand significant changes in how they interact with partners and fund managers. Investors are demanding more control over how their capital gets deployed, more transparency, and are working harder to align incentives throughout the intermediation chain. A new and improved real estate fund model should result from this phenomenon.
As is also the case every year, cities and regions gathered at MIPIM to woo investors and proudly display their recent accomplishments and ambitious projects. What they choose to emphasize and promote is yet another way to gauge the current drivers of global real estate capital flows. Alongside the traditional arguments (location, vision, industry mix…), many cities chose this year to promote themselves as safe, stable economic environments and as having ambitious and sustainable infrastructure upgrade plans. There also seemed to be a new emphasis on urban development projects that respects and fits a region’s culture. The challenge for many of these regions seems to be convincing observers that their dedication to long-term thinking will survive the pressures imposed by election cycles.
All told then and as every year, we all learned an amazing lot in the span of four days. The students return with a much better understanding of the boundless opportunities young professionals with their unique training can find in global real estate markets. I come back with the stories I need to give color to my teaching and motivate my research. A most productive week for all involved, in short.
The Wisconsin School of Business is a global leader in real estate education and research. One of the oldest academic real estate programs in the U.S., the school offers top-ranked undergraduate and MBA degrees through the James A. Graaskamp Center for Real Estate which uniquely challenges the next generation of leaders of the industry.
By Erwan Quintin, Assistant Professor of Real Estate, Wisconsin School of Business
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