MIPIM: geopolitical risks up, but real estate a safe haven

Geopolitical risks have multiplied but the real estate sector will remain resilient, delegates heard at Real Asset Media’s European Debt Finance & Investment briefing, which took place live yesterday on the first day of MIPIM in Cannes.

“Real estate is always a safe haven in difficult times, so I don’t think it will be affected by the latest crisis, as there isn’t much of an alternative as an investment product”, said Assem El Alami, Head of International Real Estate Finance, Berlin Hyp. “What is of concern is the destruction of infrastructure and the logistics issue. We’re exposed to Poland, which remains a strategic market for us, so we’re looking at the situation carefully”.

Assem El Alami, Head of International Real Estate Finance, Berlin Hyp

It’s too early to understand the repercussions of the war in Ukraine, but there are signs that the conflict is leading international investors to delay their decisions.

“Some investors are pressing the pause button on their investment strategy”, said Gijs Sleijffers, Director Debt Advisory Netherlands, Colliers. “If you are in Asia and you look at Europe, you see a regional crisis and it makes sense to review your strategy. But there is no liquidity freeze on the horizon and I see no big disruption on the market”.

It is likely to be a marginal and hopefully short-lived suspension of normal activity.

“Capital seems to be pausing a little bit, for various reasons, but I agree that real estate will end up being seen as a safe haven, so the sector will be in a strong position in the end”, said Hans Vrensen, European Head of Research and Strategy, AEW.

“LTVs across the market are quite modest and banks are not doing anything silly, so no big fall-out is expected from this latest shock. Real estate is in a much better position than the economy as a whole”, he said.

There are many flashing points on the horizon: some closer to home, like soaring inflation, cost of living crisis, interest rate rises and the risk of lower economic growth, and some further afield, like the repercussions of the new lockdowns in China.

“It is difficult to tell what problems they will cause down the line, but the fact is we are in a phase of re-shoring and de-globalisation”, said Vrensen. “It means more reliance on our own region, which is not as easy as it sounds. There are short-term logistics problems we can see and longer-term issues too”.