The MIPIM Innovation Forum was a huge success this year at MIPIM. Boasting a dedicated space of 2,00 square meters in the Gare Maritime building next to the Palais, the Forum attracted key players involved in building tomorrow’s cities to come together, debate and share ideas. The conference programme highlighted innovative solutions to maximise the value of property portfolios.

To wrap up the ideas shared and dicsussed during the 4 day event, Erik Sonden, Senior Advisor from Ernst & Young was joined by Peter Woodward of Quest Associates and Sarah Jancot from the ESSEC Real Estate and Sustainable Development programme to present the:

Top TEN golden rules to increase the value of the property asset:

Rule 1: Location, location, location

Rule 2: Know your buildling and adopt new technologies

Rule 3: Long-term vision pays dividends

Check out the full list of rules here!

Don’t miss the minutes of the session for a more in depth explanation of each rule!

Image: Images & Co. /360 Media

Jean Viard, Head of Research at CNRS sees 2 major changes to come surrounding urban space in cities:

Life expectancy and pace of our activities: “The most radical changes in our societies concern life expectancy and the pace of our activities. Because paradoxically, the more time we have, the faster we use it. Life expectancy in developed countries has increased by 40% in a century, and there has been an accompanying densification of time use.”

“We’re still gaining three hours of life per day and meanwhile the time spent sleeping has fallen by two if not three hours a night in two generations (…) the time available for activities has been substantially transformed.”

Mobility and privatization of the social bound: “The change in the relationship to time and the faster pace at which that time is used has taken us from a sedentary culture, a culture based on a fixed “lair” with trips away of varying lengths, to a mobility culture with certain fixed points of reference and signposts. The invention of technical objects (from the train to the car, from the landline telephone to the mobile phone, then the internet) has enormously broadened our scope of action through extended physical or virtual mobility.”

“Towns and cities are becoming places for single people, for encounters, for interaction (business encounters, cultural interaction, lovers’ meetings) while families, and also companies which are getting bigger, are tending to settle in the peri-urban zone.”

“Privatisation of the social bond, which is increasingly developed in the domestic space, has intensified the need for public areas for random encounters.”

Read more from Jean Viard pages 25-31

Pierre Veltz, Professor and researcher at ENPC and Sciences Po believes evolving lifestyles are the driver of urban change.

Towards a despecialisation in built-up areas: “Our towns and cities are very old, and have adapted to a great many new uses. Evolving uses (lifestyles, working methods, leisure uses, etc) are the real driver of urban change. With today’s nomad devices, our relationship to the space and time of work has changed considerably.”

“The Smart Work Centers developed in the Netherlands show that new ways of combining work functions with residential spaces can be imagined. (… )I think we’re moving towards a form of de-specialization in built-up areas. Town planners are trying to fight functional segregation but so far there’s been no real rethink of the specialization of spaces: we’re still building shops, factories, offices, homes and places for leisure and culture. The future could bring more mixed spaces, like the Rolex Learning Center in Lausanne, Switzerland which is a restaurant, a library and a public meeting place.” 

More flexibility, more mobility: The current conception of spaces and buildings and the current regulations are preventing us from making the best use of our cities’ potential. “Increasing mobility in housing, and in buildings more generally, is a necessity.”

Read more from Pierre Veltz pages 38-45

Image: Flickr-@MaryG_MU

For many retailers, “partner” is not the first word that comes to mind when thinking about their landlord, but maybe it should be. After all, besides the retailer, who has more to gain from a tenant’s success than the person who collects the rent? Savvy shopping center managers are realizing that by building active communication channels with their retailers, great ideas can flourish from which all parties will profit.

For the latest thinking on how landlords can help tenants succeed, CRE expert and commercial broker Michael Lagazo spoke with David Bujnicki, vice president of investor relations and corporate communications at Kimco Realty Corp. Kimco (www.kimcorealty.com) is a real estate investment trust (REIT) headquartered in New Hyde Park, N.Y., that owns and operates the nation’s largest portfolio of neighborhood and community shopping centers — more than 896 properties comprising 131 million square feet of leasable space. Kimco’s centers are filled with approximately 8,400 individual tenants, from mom-and-pops, to franchises, to regional chains, to the biggest big box retailers and grocers.

Q: Mr. Bujnicki, what’s the biggest thing a landlord can do to help retailers?

Landlords should make it easy for their retailers to talk to them.

A landlord has tremendous influence over the success of every retailer in his center. The mix of retailers in the center, whether complementary retailers are located together (co-tenancy), easy access to the center, and whether the center is attractive and well-lit – these issues are critical to drawing shoppers and boosting sales. A landlord will use market demographics and competition comparisons to make such decisions, but a good landlord will realize that his retailers know and see things that he can’t see at a corporate level. Kimco operates its centers using a regional management approach to better understand the local market and be more accessible to tenants, shoppers and community officials.  Retailers can easily reach their local Kimco representative. They can also reach us through our individual shopping center websites and our corporate Facebook page, which we monitor constantly.

Retailers, if your only communication with your landlord is to send the rent check, you are missing an opportunity to be heard.

Q: What should retailers be asking landlords to help them succeed?

Ask your landlord for help promoting your business.

Good landlords recognize the value of their smaller shops.  While large anchors may be the big draws to a center, smaller stores typically pay much higher per-square-foot rents. And small shop vacancies can take longer to fill. Landlords want them to succeed.

Most corporate landlords have communications teams with media contacts and marketing tools that local retailers won’t have.  Kimco is very successful at building exposure for our shopping center tenants in local newspapers and online. One way we draw media and consumers to our centers is by organizing community events within our public spaces, and using these events to cross-promote the center’s shops. Also, Kimco has a corporate blog where we provide small business tips and write features that highlight our smaller tenants, pointing out what makes these retailers unique. Another marketing strategy we use that has proven very popular with customers is to offer a gift card sweepstakes to a particular store or stores using Facebook.

Ask your landlord for help promoting your business. Make your landlord aware of newsworthy events in the community and special promotions in your store, and ask how you can be featured in any social media marketing campaigns. If you have a good idea for something that would work for your store or center, tell your landlord.

Q: How can retailers counter the threat of online shopping?

Find ways to make e-commerce complementary to your brick-and-mortar business. Online shopping is here to stay. Mobile and electronic devices are ever more critical in how shoppers research products, so retailers should post on the internet as much detail about their products and services as someone may need to make a decision. Going further and providing online scheduling or online ordering is ideal. Providing in-store pick up is a great strategy to leverage e-commerce while still getting traffic in the door. Look at e-commerce as a tool that works for you even when the store is closed for the day.

Even if a retailer chooses not to provide the full online shopping experience, you should at minimum make it easy for customers to find your business location, products, operating hours and the latest promotions. You must provide an electronic way for customers to contact you, since buyers are gravitating away from making phone calls. Having your own Facebook page is an easy way to do all of these things, and it’s a snap to update it with your store’s latest news and promotions. Your landlord can probably help you get started.

If foot traffic is critical, find an e-commerce resistant location.

Kimco’s shopping centers are typically anchored by necessity-based retailers like grocery and drug stores, which people still need to visit often. Retailers that are heavily dependent on foot traffic should locate themselves near such daily needs stores, or within view of a well-trafficked street. Restaurants of all types are doing very well, so locating near such an establishment can help draw traffic to your business.

Make every customer visit more profitable.

For many retailers, the increase in online shopping means fewer in-store visits. Retailers must think strategically about how to make each store visit count more. It takes less effort to increase the average amount sold per customer than it does to increase foot traffic for a sustained period. Create an immersive experience or an inviting environment within your store that encourages customers to stay longer. Give your customers the ability to sample or try out your products or services. Once they try, they are more likely to buy. Display complementary items such as products and accessories together, and offer impulse items near the registers. Offer a rewards program and other loyalty promotions to encourage repeat visits.

Use data to help you refine your sales efforts.

You want your marketing effort to precisely target your ideal shopper to increase the dollars spent per transaction. Tools such as ShopperTrak and Motionloft count people, capture data, and provide analytics in retail environments. Retailers can calculate total sales opportunity and conversion rates; compare site performance locally, regionally, and nationally; gauge marketing effectiveness; and improve payroll efficiency.

Landlords use these kinds of tools to determine shopper habits, spending trends, daily and hourly patterns, and identify which locations or categories perform better than others. Ask your landlord. She may have gathered data on your center that she can share with you.

Q: Is there any other advice that you would give to retailers?

Get the most out of your lease.

Leases are not the most exciting part of being in business, but they are probably one of your largest fixed expenses. First, understand your contract. Develop a real estate strategy that covers site selection and option development, and be sure to include an exit or renewal strategy. Have your own advocate (SBDC volunteer, an accountant or an attorney) and don’t rely on your landlord to explain the terms.

Once you are up and running, verify that your landlord is fulfilling all of his lease obligations to you, and make sure that you are in compliance with contract standards. Track key dates and deadlines in your lease to avoid potentially costly defaults and penalties.

Keep communication lines open and actively foster a solution-based relationship with your landlord. In this market, landlords are used to adjusting leasing strategies and offering more flexibility in space configurations to adapt to ever changing consumer choices.  Have a candid conversation with your landlord before a problem arises and avoid last minute emergencies.

Q: How does Kimco feel about the current retail real estate market?

We’re optimistic, even given the economic uncertainty.

Our numbers for 2012 reflect both a strengthening in the retail industry and the success of our strategy to upgrade the quality of our shopping center portfolio. Despite some national retailers downsizing store counts or store sizes, absorption of existing space is still outpacing new development, and plans for store openings are the highest in several years.

Q: Can you provide any numbers on occupancy and renewals?

All of our operating metrics are favorable.

Kimco ended the year with occupancy levels at 94 percent, our highest since the third quarter of 2008. Anchor spaces are doing particularly well with occupancy levels at 97 percent. Same store performance improved again, for the eleventh consecutive quarter, with same-store net occupancy income (NOI) up 3.4 percent.

Rents are being pushed higher, reflecting growing demand. New leasing spreads averaged 28 percent for full-year 2012. In addition, more existing tenants are choosing to stay. Our lease renewals and options grew 6.1 percent in the fourth quarter.

We think this is a good business climate for both landlords and retailers.

Meet up to 2,500 global retailers at MAPIC 2013!

Michael Lagazo has held leadership roles at some of the largest commercial real estate companies including Westfield Group and Forest City. Michael optimizes performance and drives financial results for top commercial real estate projects in the U.S. Among his projects, Michael managed a 1.7 MSF coastal luxury development and was a shopping center executive at Forest City’s 160-acre super regional center, Victoria Gardens. Highlighted inShopping Centers Today, Wall Street Journal, Commercial Property Executive, National Mortgage Professional, Michael holds an MBA as well as a dual Bachelor’s Degree in business.

Image: Flickr-chooyutshing

In joint collaboration with the ESSEC Business School Real Estate and Sustainable Development Chair, Prof. Ingrid Nappi-Choulet, we have produced

“Minutes from MIPIM 2013 Conferences”

Conferences on Innovation, Cities, Sustainabilty, Energy and Architecture

Download the MINUTES from MIPIM 2013

• Keynote panel: Energy efficiency & resources’ management
• Decalogue for a senseable / Smart city
• Keynote panel: Can skycrapers be sustainable?
• Keynote address by architects: Architecture and responsible innovation
• The future of CRE: Trends to set to revolutionize our industry
• Should measuring sustainability be a job for the accountants?
• Does being green create value for end-users
• Views of 6 stakeholders, manage innovation for a better ROI
• 10 golden rules to increase the value of the property asset

Don’t miss the first issue of the Cahiers de la Chaire Immobilier et Développement Durable, taking a closer look at the changes in society and real estate that are transforming our towns and cities.

Download Real Estate and the Changing Society

EuroProperty Trends is a free digital monthly publication brought to you by the teams behind Estates Gazette and MIPIM.

This month:

“Europe sparkles for Asian investors but has Poland lost its lustre?”

Highlights from the May edition include: Interest in Europe that emanates from Asia, why London is attracting so much interest from Asian investors, the ongoing quest for transparency in the property market, and a close up on Poland: the reasons for its success and its prospects for the future.

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See past edition of EuroProperty Trends here

The Russian Idea  … everything on earth is just waiting

to merge with truth,
just as moonlight merges with night.

-Anton Pavlovich Chekhov

Coming to the MIPIM Conference in Cannes, France as a part of student delegation from University of San Diego, I was excited to gain a better insight in the European real estate market including my home country Russia. I was ready to encounter a significant number of Russian companies at the conference, but what I encountered exceeded all of my expectations.

From having the largest pavilion just for the Krasnodar Region to heavy advertisement along the main drag, Le Croisette, Russian presence impressively dominated MIPIM 2013. The conference attracted over 2,000 Russian attendees, so anywhere I went I was reminded of the extensive real estate development in the country of my origin. To say that I was surprised would be an understatement. I was shocked. I was also proud. Not surprisingly, I decided to cover the Russian sessions at the conference and dig in a little deeper to figure out what exactly is happening in Russia and what are its current real estate development and investment opportunities.

I started with the 11:30 session on March 12 organized by Russian Vedomosti, which was held in Auditorium A of the Palais des Festivals. The rather large auditorium was almost at full capacity when the session started.

Speakers:

• Igor Slyunyaev, Minister of Regional Development
• Vasiliy Galushkin, Deputy Chairman of the Volgograd region
• Veniamin Golubitsky, President, KORTROS
• Yevgeny Kudelya, Minister, Krasnodar region resorts and tourism ministry
• Alexey Novikov, Director, Sberbank Asset Management
• Igor Divinsky, Vice Governor of St. Petersburg Region

Impressed by the high caliber of the speakers, I listened attentively to every word coming from the stage. According to Igor Slyunyaev, Minister of Regional Development, Russia poses an extensive platform for investment. The reasons underlying this statement were:

1. Stable economy and low inflation rate
2. Government support and stimulation of the development industry
3. Low corporate taxes and other newly released regulations promoting business and development.

Russia has a convenient geographical location between Europe and Asia and a great transportation potential. “Our country must take advantage of these logistical opportunities,” he argues. Plans of the government include development of better road infrastructure, particularly in the low-population regions, and significantly increasing residential construction in other regions than Moscow and St. Petersburg.

Russia is about to host several major international events: 22^nd Winter Olympic Games and Formula 1 held in Sochi in 2014, 21^st FIFA Worldcup in St Petersburg in 2018, and 8^th G-20 summit also in St Petersburg in September 2013. The development of New Moscow Region is another subject of interest, and lots of redevelopment is planned in that region.

Consequently, the above impressive list of events events creates a huge necessity and potential for extensive development and investment. Russian government seems to be very supportive in the process and it is ready to work with foreign investors to create profitable long-term partnerships.

Nevertheless, there are current issues that limit the amount of outside investments. According to Alexey Novikov, there is “a slow and determined development without changes in the government.” “Transparency in the decision and deal making is a crucial factor,” he continues. Veniamin Golubitsky, President of KORTROS Group supports Novikov by saying that “federal problems are the main issue in Russia. For outside investors, stability is what really matters.” Creation of understandable and clear rules and regulations governing investment and development should be the next step in the Russia’s to do list.

The other two sessions I visited that day organized by Vedomosti and then Moscow Times carried the same message: there is a lot of development going on in Russia and even more is needed, but there is a lack of international investment.

The development industry has definitely picked up in the last couple years amidst the global recession. Some of the largest Russian companies would be Donstroy, Hals Development, already mentioned KORTROS that had an extensive marketing campaign at MIPIM (I think many of us tried its red wrapped chocolates), MEBE Development, Morton GC, Est-a-Tet, and PIK Group.

The company that impressed me the most, however, was the developer of the future tallest building in Europe. Two tallest buildings to be exact, since Hermitage Plaza will be an 86 story two tower mixed-use project that will include residential, retail, office, and hotel. Located in La Défense business district outside Paris, this ambitious project will be also one of the most sustainable buildings in France. The architect of the project is Norman Foster, which is another bonus. According to Hermitage SAS President, Emin Iskenderov, he saw a real opportunity to develop in Paris. No other Russian developer seems to build on such scale outside Russia. This bold move is a game changer for Russian development industry and its reputation on the global market.

My overall impression of the current Russian real estate industry was above positive. There are many great projects to be developed and there is definitely enough land for it as well. The standards are high, and Russian professionals follow the latest techniques in design and construction. So what does really stop foreign investors from doing business in Russia?

The answer to this question is well known to many, but it is avoided at the sessions and cocktail parties. The fact is that there is a huge stereotype about business in Russia, and it exists for a reason. Despite Russia’s rich resources and its place among the world’s fastest-growing economies, there remains a general feeling that the country is falling far short of its potential. There is one overriding reason why Russia is failing to achieve its economic potential and failing to attract outside investors: corruption.

Corruption, bribery, and unregulated law system are the main issues in the country that scare foreign investors. No matter how rich is the country or how much possibly profitable development there is, foreign capital won’t get involved in an unstable and unsafe environment. Not every business transaction in Russia involves corruption. But just because of this stereotype and the frightening stories in the news about antigovernment protests and increased emigration, investors won’t put a foot in Russian territory.

The current main task for many Russian companies is to find a way to offer a stable business environment to foreign investors and to prove that a profitable and safe business without constant bribery and corruption is possible in Russia. It is not an easy task to do, but I am sure we will get there. There is way too much potential in this country, and sooner or later (hopefully sooner) the economic and government regulations in Russia will provide a solid, protective fundament for foreign investments.

Next year, Russia along with Turkey and Brazil will be the countries of honour at MIPIM 2014. What progress. Congratulations, Russian Federation!

Now, besides being the “key investment destination,” let’s also become the safest, strongest, and most stable destination. These key elements are what will really make an impact and create the change needed to attract foreign investments, and lift up the country’s economy and development to the level it truly deserves.

Inna Panchuk was born and raised in Russia and moved to the United States at the age of 18. She received her BS in Management from San Diego State University and is currently earning her Masters in Real Estate at University of San Diego. She is a curator of the MIPIMWorld Sustainability and Innovation press review magazine.

Image: flickr-MIPIM_World

Speakers

Chris Ludeman – President, Capital Markets CBRE
James Fetgatter – Chief Executive AFIRE
Dr Will McIntosh – Global Head of Research USAA Real Estate Company
Bernard Haddigan – President Haddigan Capital

Foreign >>US Investment at a Glance

$25b in total (2012)

• Canada $9.1b
• Middle East / Europe $11.3b
• Middle East dramatically increasing
• Asia $4.4b
• South America $.58b

According to James Fetgatter via a survey conducted by his company, 39% of those surveyed were more optimistic on the US economy than they were a year ago and 0% were more pessimistic.

Safe Haven

According to Chris Ludeman, the stability of the US political structure is a major factor in the reputation of the US as a safe haven for foreign investors. This reputation is one that is bolstered not only by improvements in the US political structures, generally speaking, but also by instability in other regions of the world creating a positive relativity effect for the US.

However, the reputation of the US political system as a pillar of stability may be at risk given current events. James Fetgatter suggests that there are two major contributions that harm the confidence foreigners have in the US system; the $14t in national debt and the current freeze up in Washington caused by severe bipartisanism between democrats and republicans.

Dynamic Environment

The US maintains a highly dynamic economic environment at several levels; social, legal, financial, to name a few. Because of the social principles of the nation, the demographics of the US are always in a steady state of flux. Immigration continues to be an important part of US culture and these immigrant populations create opportunities for developers and investors because of their variety of tastes and needs.

The large number of cities and their ability to have unique legal and political initiatives provides further wrinkles in the opportunity fabric. Because of the multitude of niches foreign investors have a large number of investment products to choose from based on their individual tastes; as Chris Ludeman put forth, this appeals to foreign investors who represent a vast array of demands and priorities.

Hunger for Capital

The current US real estate development market is hungry for capital. Banks are lending with far tighter standards than pre-crisis conditions. Because of the tightening in the debt market developers are forced to look to equity, exactly the resource foreign investors are able to provide.

In Conclusion

The US market remains a world leader in foreign investment. Despite current political lockups between self-interested political parties, the US political system remains stable. The diversity of US culture creates a breeding ground of opportunity and a wide range of offerings for foreign investors. Mature systems exist to facilitate foreign investment. Today, unique lending tightness provides further incentive for US developers to welcome foreign equity. The US is in strong position and poised for further improvement if political entities can clean up their act and display more effective leadership.

Tony Konstant is currently receiving his master of Science in Real Estate at University of San Diego. He is also a guest curator for the MIPIM sustainability and innovation category on behalf of the University of San Diego, Burnham-Moores Centre for Real Estate.

Image: V Desjardins / Images & Co

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The commercial real estate finance talk was thrilling and very encouraging for the sector. It included discussion on “legacy” CMBS maturity, the B-piece buying market, single property CMBS, and the debt funding gap in Europe. The all-star panel that spoke was comprised of Matthew Bornstein, Head of Capital Markets Trading US Deuschte Bank Securities, Wesley Barnes, Head of European Real Estate Finance Citigroup Global Markets, and Jame Mcaffrey of Eastdil Secured.

The event began with discussion of the amount of CMBS issuance in the United States over the past few years. In 2011, the group noted that there was $15-18 billion dollars of CMBS issuance, $45 billion in 2012, and that we have already done $26 billion in Q1 of this year. Mr. Bornstein suggests that we may exceed $100 billion of issuance this year.

One of the popular topics that has been common in commercial real estate finance is the amount of CMBS that is maturing in 2015 through 2017. Usually being a 10-year product, this debt will have to be re-financed, loan modified, or liquidated. Access to capital will play a fairly critical role in how these CMBS are met at maturity. “We will have to wait and see how the market copes with the robust number of maturities during this period”, said Bornstein.

There are some new trends in commercial real estate finance. One of these is the single property CMBS market. Instead of the classic pooled fund CMBS, investors are able to buy into single assets, most commonly “trophy” properties. The owner only has to go to one bank, and the CMBS can be issued in less than one week, which is extremely fast. Becoming more common, Bornstein said that there is on average one single asset CMBS issuance a week.

Much of the CMBS market is dependent on the B-piece buying firms. The B-piece buyers invest equity at the bottom part of the capital structure, usually the bottom 7%. When more and more players enter this part of the capital stack, it is an encouraging sign for CMBS issuance. Without this equity residual that these firms allocate, the CMBS would simply not be underwritten. They usually buy at a discount and receive their investment back over time. Being at the bottom of the capital stack, however, they are the riskiest. “Over the past few months, the numbers of B-piece buyers have doubled”, says Bornstein.

Wesley Barnes briefly spoke about the estimated funding gap of commercial real estate financing in Europe, which is estimated to be close to $82 billion. The main factors contributing to the lack of financing in CRE include currency risk, lack of buyers of the most senior tranche of the capital stack, and the different legal systems. The buyers of the AAA bonds simply are not there. Without these players, it is impossible to get these CMBS issued. As this gap will create an opportunity for other investors, someone will meet this demand. There is estimated to only be $10 billion of CMBS issuance in the EU this year, $90 billion less than that of the estimated US issuance.

Whether you consider this investment vehicle a product of financial engineering or real estate, it is here to stay. The B-piece buyers are coming back, investor risk appetite is increasing, and interest rates are low. These all point to an abundant CMBS market. Financing mechanisms for commercial properties are very important to the real estate asset class and we should keep them on our radar.

Bryan Masters is  currently receiving his Master of Science in Real Estate degree at the University of San Diego while working as an analyst for a real estate investment firm. He is also a guest curator for the MIPIM sustainability and innovation category on behalf of the University of San Diego, Burnham-Moores Centre for Real Estate.
contact Bryan

Image: V. Desjardins / Images & Co

During MIPIM, many of the conversations focused on where the money is now and where it is going. One of the panels during MIPIM featured Michale Levy (COO of Morgan Stanley), Russell Jewel (Head of Private Equity for AEW Europe) and Francois Trausch (CEO of GE Capital RE Asia Pacicific). The topic was on private equity. The panel’s discussion touched on where investors are seeking returns, where the new sources of capital are, and how investor’s tastes have changed since the financial crisis.

Mr. Jewel referenced the funding gap in Europe. This gap is estimated to be around 82 billion Euros. The consensus of the group is that this funding gap is more of an opportunity than a threat. Europe presents an appealing opportunity for investors. The Continent is de-leveraging much slower than the United States. In the US, more than 60% of distress has been worked out. In Europe, only about 15% of the pile of distress has been worked out. Mr. Levy and Mr. Russell agreed, however, that they are perfectly content with receiving smaller IRRs that are good when compared to other relative options. Investors don’t need their 20% IRR if it comes primarily from leverage and risky markets.

Capital is flowing from some new sources and some renewed sources. A new source that Mr. Levy referenced is the money that will come from private Chinese life insurance companies. In the fourth quarter of 2012, restrictions in china changed and now these life co’s can deploy their capital overseas. As far as renewed sources of funds, the commercial mortgage backed securities (CMBS) market is back. In the US, the market climbed back to over $50 billion in 2012. According to Mr. Matt Borstein of Deutsche Bank, the market accounted for $26 billion in the first quarter of 2013 alone. This money will trickle over to Europe, according to Mr. Jewell.

Beyond the smaller IRRs, what else are these market makers hearing from their customers? The taste for large commingled funds has waned. Mr. Russell referred to capital raising, instead of fund raising and Mr. Levy said that they prefer larger pools of loans that consist of larger bonds within them. These comments describe the market sentiment that investors want to understand the underlying real estate assets that they are investing in. Everyone prefers more thorough underwriting on assets that they can understand. While this may seem like common sense, it is a direct product of the residential MBS market imploding in the US, where investors did not understand the quality of the underlying loans. Transparency is paramount in the post-crisis world.

The general conclusion from this talk, and others, is that there is significant opportunity in Europe. However, foreign investors like those from the USA, are not eager to take on the risks (including currency risk) in order to receive a bump in their IRRs from 15% to 20%. While this may change as more deals in Europe are completed, for now it seems that significant capital is still queued up on the sidelines of the EU waiting to enter the game.

Tom Bobo is currently pursuing an MBA and a Master of Science in Real Estate at the University of San Diego. Tom is an official curator for the MIPIM World Blog Sustainability and Innovation industry news section.

The main real-estate indicators show that the Montréal market is solid during times of economic uncertainty and dynamic and profitable during economic upturns. As a result, Montréal offers local and foreign property developers:

• Relatively stable value and number of building permits, for both the residential and non-residential sectors, with rapid growth since the 2008 crisis.
• Canada’s second-largest market for office space, after Toronto, thanks to an inventory of 4,331,016 m² of class A and B premises. The city’s business district has seen its vacancy rate decline significantly, from 7.7% (Q4 2010) to 5.8% (Q2 2012). Large contiguous space has become harder to find, ground has been broken on a new 26-storey tower in the heart of downtown and rental space is being offered in mixed projects currently under construction. The gross rent downtown for class A buildings is about $448/m². Capitalization rates, both downtown and in the suburbs, are stable (5.75% to 6.50% for class A buildings downtown and 6.75% to 7.75% for the same type of building in the suburbs).
• A highly promising and varied industrial market, with an inventory of 27,642,788 m², making Montréal the second-largest market in Canada, after Toronto. The vacancy rate fell to 4.3% in 2012, leaving room for new construction in 2013. The variety and potential of the Montréal market stems from a number of ageing industrial tracts, among the oldest in Canada, that are gradually being converted to other, more intensive economic activities, and new construction to meet businesses’ latest needs. The average rent is up ($84.5/m²) but depends on location. The capitalization rate is stable, at 7% to 7.75% for multi-tenant class B buildings and 6.75% to 7.50% for single-tenant buildings.
• The property development market on Montréal Island is booming, and transforming the face of the city. There are currently 188 projects worth $5 million or more, for a total of $16.2 billion. Nearly 80 cranes dot the Montréal skyline. There are some major public-sector projects, but most have been initiated and carried out by and are intended for the private sector (residential, commercial and industrial).
• The Montréal market remains reasonable, nonetheless. The expected decline in housing starts, to avoid seeing the speculative home construction bubble burst, suggests that the market will adjust smoothly. Montréal property developers are remaining cautious, waiting for pre-sales to reach a satisfactory level before putting shovels in the ground. In other words, the market is adjusting, but remains healthy. In 2012, the volume of properties sold on Montréal Island grew by 1%, to $6.2 billion. Property prices continued to rise by 4 to 6% and the rental vacancy rate dropped from 2.5% in 2011 to 2.3% in fall 2012.

Johanne Royer

Communication Expert – Könige communications

Könige communications is a communication agency that distinguishes itself through its strategic communication approach and by its ability to achieve goals by offering clients a range of integrated services, such as communication counseling, branding, web strategies and design, public relations (press relations, speech writing, coaching) and event planning. Johanne Royer is the founding president of Könige communications. She is also the official representative of MIPIM in Canada.

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Sources: devencorenkf.com, collierscanada.com, cbre.ca, schl.ca, cigm.qc.ca and conferenceboard.ca

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EuroProperty Trends is a free digital monthly publication brought to you by the teams behind Estates Gazette and MIPIM.

This month:

“Searching for Solid Foundations from the Middle East to Europe’s Public Sector”

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Highlights from the April edition include: What sprung from the Arab spring? As the Middle East’s new political landscape takes shape we assess the impact on property Germany has been the rock-solid Eurozone property market – we analyse its strengths …and weaknesses As Europe’s public sector slims down, asset disposals are underway. But there are differing approaches and differing degrees of success. We contrast the two and highlight another north-south divide Spain’s bad bank will become the country’s largest ever property owner – how will it help remedy the Spanish property market’s ills?

See past edition of EuroProperty Trends here

“Changing workplace (Office/Logistics/Industrial/P&Ds) Role of Corporate Solutions, Emerging Opportunities in Workplace. Prepare for changing trends”

The office workplace is changing tremendously. With modern technologies, smartphones, and Internet governing the way we live and work, companies are seeking new innovative ways to accommodate employees and adapt to the new workplace trends.

So what are those emerging trends?

In a panel discussion at the Turkish Pavilion moderated by Can Gun Gokkaya from Jones Lang LaSalle, experts and developers of the office buildings presented their viewpoints on the changing workplace.

Higher demand in productivity, shrinking office space, and time efficiency were some of the discussed issues. Also, location is playing a more important role with companies shifting their preference to CBDs. Companies want a prime location on a budget with high employee productivity. These demands are not easy to accommodate.

Efficient elevators, easy access hallways and entrances have become an essential part of any modern office building, since people cannot afford to waste time. One of the panelists gave an example of an office building his company developed, where they used double-deck systems that significantly lowered the number of elevators.

Creating open spaces for socializing is another trend. “People spend approximately 11 years of their lives at the office.” They do not have enough time to socialize outside their work, so bringing this opportunity into the workplace is crucial. The research shows that only 47% surveyed employees were happy at their work. This data is from 2011, and it is a lower number compared to the 51% in 2008. Office is considered to be a boring place where the only thing you do is work. This lowers productivity and employees’ satisfaction with the company. Consequently, creating a workplace that combines working aspect with the socializing one is one of the main priorities for many companies. But how can you create such a space without spending extra?

The concept of the folding office gives a partial solution to the problem. Multiuse of space by incorporating transformable furniture and adjoining extra facilities into the office helps improve employee well being while cutting costs on extra square footage. The extra facilities could include movie theaters, personal training spaces, basketball courts, and outside areas when people can get outside and breathe fresh air. In this case, employees would spend more time at the office instead of spending it commuting in the traffic jams. The Turkish company that introduced the concept of folding office worked with Henry Allen, a world famous designer, to create space and furniture that would help utilize seldom used areas by “folding” them. They then use it for other purposes, which significantly decreases the required square footage and, consequently, lowers the cost.

“Main assets are human assets” and “soft costs are more important than hard costs” were two of my favorite phrases during the discussion. Finally, companies and developers realize that the offices must be built for humans. Happiness of the employees should be on the first place prior to sustainability or monetary savings.

Incorporating new ways to satisfy employee needs in the increasingly shrinking workplace while balancing the cost of prime locations is the new trend and a challenge for companies. The only way to be successful in this task is to be innovative and creative with the office space, incorporate more collaborative areas, and use new technologies to minimize the required footprint.

Inna Panchuk was born and raised in Russia and moved to the United States at the age of 18. She received her BS in Management from San Diego State University and is currently earning her Masters in Real Estate at University of San Diego. She is a curator of the MIPIMWorld Sustainability and Innovation press review magazine.

Image: Flickr Images & Co / 360° Medias

An Introduction to the Panelists

Ralph DiNola – Principal, Green Building Services, Portland, Oregon

Kasper Guldager Jorgensen – Partner, 3XN; Director of GXN, Denmark

Eric Lesueur – Principal, VEOLIA, France

Joakim Larsson – Vice Mayor, Stockholm, Sweden

Meg Forbes – Global Real Estate Director, Mastercard, USA

Moderator

Dr. Norm Miller – Professor, University of San Diego

Mapping the Landscape

Dr. Miller began the discussion by describing the current state of economy as it relates to the real estate industry and innovation:

Short-term

• Low interest rates dominate in most countries, fueling an appetite for real estate investment.
• An enormous amount of cash is sitting on the sidelines.
• Corporations have become leaner at a rapid rate; governments have followed at a slower pace.

Mid-term

• Office space per worker is declining due in large part to changes in productivity related technology but also a growing understanding by designers and principals about the behavioral patterns that stimulate productivity. The power of spontaneous interaction in fostering good ideas has true value and is increasingly addressed in office space design.

Economically, future values in real estate will depend on a race between interest rates and rental growth rate.

Long-term

• PPP’s (Public-Private Partnerships) will gain in importance.
• Need for data centers and other technology infrastructure will continue to increase.
• Green/Clean technologies and practices will become increasingly important.
• Innovation will occur most vigorously in “connected” cities – those that embrace the connective power of information technologies to created smarter more responsive live-work-play environments.
• Retrofits of existing stock will become an increasingly important practice to master as space for new build declines in certain hubs and densification takes further root.
• Commercial real estate values will shift from a correlation to space-size over to space-productivity.

What Makes a More Productive/Efficient Individual → Firm → City → Region

Joakim Larsson

Earnest investment in a green path for Stockholm has created an efficient, clean city that many people enjoy living in despite a harsh climate.

Stockholm has been rewarded with an increasingly diverse population and has experienced increased immigration in recent times.

Meg Forbes

The important question is not only how to create an economic environment that rewards innovation and green technologies but how to spur these investments based on principles of social responsibility.

Ralph DiNola

Focusing on passive solutions first is an excellent way to spur momentum for more dramatic investments in efficiency technologies and practices. These solutions represent the low-hanging fruit in the innovation investment market.

Honing skills and techniques in retrofits in order to create green products from existing stock will pay higher dividends than new build green structures.

Eric Lesueur

City-scale innovations have the greatest power to affect change. Improvements in quality of life through innovative solutions to problems of pollution, congestion, crime within an urban core have impacts at the level of individual citizens that are compounded as these citizens interact with each other.

Kasper Jorgensen

Exploration of what is possible through greater understanding of our various connected systems (people, buildings, cities, regions, global resources) is critical.

Understanding human behaviors and responses is fundamental to realizing returns on the investments that are made towards innovation or green technology. Creating spaces with high return potential are less successful if the critical elements of interactivity with the people occupying the space are not fun or intuitive or advantageous.

Tony Konstant is currently receiving his master of Science in Real Estate at University of San Diego. He is also a guest curator for the MIPIM sustainability and innovation category on behalf of the University of San Diego, Burnham-Moores Centre for Real Estate.

Image: Flickr-MIPIM_World

Dr. Mahdi Mokrane, Head Of Research & Strategy at AEW Europe and François Ortalo-Magné, Albert O. Nicholas Dean at the Wisconsin School of Business, brought MIPIM 2013 to a close with the “MIPIM Wrap-Up: Painting the Big Picture”. A seasoned MIPIM Wrap-Up host, Francois Ortalo Magné remarked that last year the buzz phrase was cautious optimism. This year he said, it’s more like “beyond cautious.”

Mahdi Mokrane reported on the economic foothold by region. He pointed out that due to a stengthening US employment, expected to reach pre-recession levels by end of 2014, the US market is rather solid and the GDP is expected to be above growth by end of the year. In Asia, we can expect the office market supply outlook to remain below long-term averages from 2013 to 2016, however the region will stay strong with economic acceleration in Hong Kong, Singapore, Korea, and Taiwan. Lastly, Europe clearly has a more unpredictable future. Real estate strength currently seems to be strongest in Germany, followed by UK, then France and the Nordics. That being said, France is crucial in determining the direction for the entire region.

Watch the Wrap-Up!

Click here to see all conference videos from MIPIM 2013

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MIPIM 2013 Wrap-Up: Global real estate outlook by AEW

MIPIM 2013 Wrap-Up: Insights from participants by Wisconsin University