MIPIM 2018: It’s not countries, it’s not even cities, rather, it’s neighbourhoods that are driving increased focus for global investors.
That was the key takeaway from the EG Global session Destination Known.
“We need to start thinking about investment away from buildings and look at neighbourhoods – look at the people, understand what they want,” said Yolande Barnes, head of world research, Savills.
Barnes was also keen to point out that the fundamentals of occupier demand and the increased use of technology was changing our world view of real estate investments.
“The traditional central business districts are being disrupted by alternative neighbourhoods.
“Savvy investors are less concerned with bricks and mortar or concrete and grass but more in people. Neighbourhoods with growing middle classes and youthful populations.”
Jarek Morawski, head of research, Europe, Grosvenor Europe, echoed Barnes, saying: “Real estate is now much more about experiences and the people that occupy and surround our buildings. Place-making is about making a city liveable.
“Headline data around prime rents in gateway cities aren’t quite as important as they once were. Neighbourhoods move in different directions and at a different pace.”
The theme of neighbourhoods working together but needing to be different was paramount. Those that “build streets, rather than buildings and move away from big box single-use types to more complex neighbourhoods with a whole host of uses will be the ones that win out.”
Barnes added that technology and proptech will enable the industry to manage strips of income in different types of property in the same location.
Liz Sworn, fund manager at TH Real Estate, reiterated by saying pricing is a challenge around core European cities.
“However if you can find young, growing, vibrant neighbourhoods, they can offer far greater yields than the traditional central business district.
“For example, Navigli, a neighbourhood in Milan, offers yields 250 basis points above the central area.”
However, different analysis is needed to make investment decisions in these more fringe locations.
Sworn used an example of how TH Real Estate has adapted its strategies and knowledge of where to invest based on the number of Facebook events in certain locations.
A similar “flat white index” which Savills has adopted was also noted by Barnes.
On location and the rise of the neighbourhood, Barnes gave a word of caution but also of opportunity.
“Investors looking for opportunities exist all around the world. However, the quality of legal title and that type of security is paramount. The real estate industry is used to investing in Anglo-Saxon legal titles or very western-established land titles.
“It’s hard to get in to the types of places where youthful countries are emerging, Africa being the prime example. However, moving forward, blockchain has the potential to change land registry practices” said Barnes.
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