Politics is becoming the key factor in returns on German real estate – The Property Chronicle
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Politics is becoming the key factor in returns on German real estate

The Analyst

Of course the MIPIM should have been cancelled earlier. When the decision was finally taken by Reed MIDEM, the fair organisers, large swathes of the gathering’s registered attendees had already taken the decision not to travel to Cannes for the event. The roster of big name companies who had already decided not to expose their people to the putative dangers of travelling to such large gatherings was threatening to snowball into an avalanche. By the middle of last week it was obvious to the dogs in the street that the event was a non-starter.

MIPIM’s face-saving announcement, that the fair would be merely postponed until June, was perhaps its only option. Who knows what the insurance implications are for an organizer to cancel a major event, with tens of millions of pre-event investment and contractual obligations on the line?

We’re not privy to this information. What we DO know is the extent to which companies plan for these large events, and deploy great marketing resources to make sure they get the maximum bang for their buck from their attendance. When the plug gets pulled on such a concentrated bundling of marketing and managerial focus, it can be very difficult to re-inject that sense of anticipation and preparation into the troops to swiftly re-muster the required energy for a fresh performance.

So, perhaps the MIPIM’s hands were bound. For the city of Cannes and the MIPIM organisers, cancelling the event wholesale was simply too bitter a pill to swallow. We now have this compromise. But the immediate future does not look much brighter either. 

The new dates of 2nd-5thJune are less than three months away. Real estate professionals would be required to share the Palais des Festivals with a major music fair – the MIDEM – scheduled for the same time, which attracts 5,500 attendees. While musical accompaniment to the signing of mega real estate deals might traditionally have been viewed as within the exuberant spirit of MIPIM, we have our doubts whether real estate moguls will take overly kindly to jostling in the aisles with titans of music recording and publishing. 

Many exhibitors, having incurred significant costs, will remain loyal and will shift their energies to preparations for the new dates in June. Still, the issue may well turn out to be moot, as the wider picture is not encouraging for the immediate future of such large gatherings. 

Large European fairs, such as the Hannover Messe at the end of April with more than 200,000 visitors, have already been tentatively postponed until July. This, along with the new proposed MIPIM dates, clash with peak German holiday periods, and for many potential attendees will involve conflicts with family commitments.

Realistically, we expect that many companies will take the view that the die is cast, the moment has passed, and we should move on, knuckling down now to deal with the other real difficulties presented by the coronavirus in 2020.

The collapse of British regional airline Flybe merely calls attention to the horrendous challenges being faced by organisations exposed to tourism, including the hotel sector. In this issue we report on a study by Engel & Völkers Hotel Consulting, which highlights how hotels in many German cities have been performing sideways, with supply now exceeding demand, putting downward pressure on yields. Many cities have big hotel development pipelines, imputing future demand that may take a severe dent as a result of the current viral crisis.

One outperformer in the German hotel segment has been Berlin, which tops the occupancy league tables, and is seeing a welcoming surge in RevPARs for hotel owners used to notoriously low room rates. The city saw a 4% rise in overnight stays in 2019, and despite coronavirus, the upward trend will surely continue, boosted in part by the opening of its new airport in October of this year.

The Analyst

About Charles Kingston

Charles Kingston is the Publisher and Editor-in-Chief of REFIRE, a specialist newsletter and website focused on German real estate for institutional investors. Based in Berlin, he has lived in Germany for 30 years, and can look back on a varied career including stints working for the Financial Times, the DeAgostini Group, the Toronto Globe and Mail, and as a proprietary derivatives trader. A native Dubliner, he graduated with a degree in Business from University College Dublin, and subsequently pursued post-graduate studies in real estate finance at the University of Middlesex.

Articles by Charles Kingston

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