Transformed real estate market awaits monetary policy shift

“A cautious outlook”, was one of the main takeaways from MIPIM 2024 for Faro Capital Partners’ managing partner Guillaume Turcas. “I think those are the two words that were on the lips of basically 99% of the people coming back to MIPIM,” he told Real Asset Insight’s Richard Betts.

“The clouds, as we know are political tensions, notably in Europe and the Middle East, the elections that are going to happen within the next two to three years basically everywhere in the world, and the fight against inflation.”

However, on the horizon is the possible easing of monetary policy. “We know it’s coming, we don’t know exactly when, but I would imagine that in the next two three months this will help the market a little bit.”

Turcas pointed out that the interest rate environment has changed completely and has reshaped deal making and investors are adjusting to the “new normal” and those that came to real estate some years ago because the price increased without doing anything are gone. “It’s mostly professional to professional which eases the competition a little bit.”

And, whereas the focus was mostly capital appreciation, now it’s value creation strategies mostly focusing on rental growth. “Everyone is rediscovering strong asset management, which is obviously a good thing, and this is the only way to get extra value out of assets.”

Looking back to 2019, it the market was mainly about office portfolios. Five years later, there is more focus on living and hospitality and has broadened from old Europe to Spain and the rest of southern Europe.

“There’s been a major shift in terms of asset classes, due to covid, and obviously the geography has literally changed and everyone is looking for the sunny spot in southern Europe.”