Every March, like Alice with her magic bottle, the European property industry shrinks itself to the size of a small sunbathed town. MIPIM Cannes is a strange Anglo-European mix - like a cocktail of rosé and lager. But there is no better place to learn about the market. These themes emerged in the Mediterranean sun:
Security is Paramount
French policemen were everywhere - trying to blend in. Not easy wearing pepper spray, taser, nightstick, heavy pistol and toting an Alsatian. But the police presence was comforting and understandable. 27000 partying surveyors are more vulnerable than they think they are. In the future, our market will have to think much harder about physical and cyber security.
Politics is the Biggest Market Risk
The U.S. President sets the global political weather, so every investor needs to understand him. Useful insights came out of our Wednesday brunch, "Brexit, Trump and the Real Estate Markets".
First, Trump says he's running a revolution and is not worried about protests and allegations of chaos. This is not a President getting used to governing. This is how Trump will govern.
Second (and contrary to some hysterical criticism), Trump has held consistent foreign policy beliefs for over 30 years. By these he will govern. Since the 1980s, he has said the U.S.'s allies rip America off. As a real estate man, he sees these allies as tenants who don't pay the rent. And if your tenant doesn't pay the rent, then you don't fix his roof or defend him against his neighbours. The U.S. pays over 70% of NATO's costs. If members don't increase their contributions, President Trump's commitment to them will erode. Trump doesn't see this as an unreasonable threat - just sensible property business.
Third, Trump is an EU sceptic. He calls it "the Corporation" and blames it for some of his Scottish golf courses' regulatory troubles.
Fourth, Trump believes "life is combat". He is a pop-Darwinian. A "winner" who backs other winners. He used to make his casino teams compete for the best results. Arguably, he is doing something similar with his administration. Internal policy debates are raging between Sino-sceptic trade warriors and open market advocates, and between EU/NATO detractors and Atlanticists. The "winners" of these debates will set US policy for the next four or eight years.
As you can see, the President's long term intellectual sympathies aren't necessarily always where Europeans would want them to be. Bear in mind too, a U.S. President has much more freedom in foreign policy than in the (constitutionally checked) domestic arena. This means Europeans will get a more untrammelled Trump than Americans.
As Trump says, [on foreign policy] "I talk to myself mainly, number one, because I have a good brain, and I have said a lot of things." International investors should have that sentence written on their desks, and adjust their decisions accordingly.
A Grand Brexit bargain?
Europe is now flanked by a revolutionary US president and a revanchist Russia. This means both the UK and EU need to think about Brexit in a completely different way. They should strike a grand new European bargain to meet the challenge of the times. Squabbles about money or free movement are quite beside the point.
Europe needs a new vision. The Brexit negotiation period should be extended and an appropriate transitional period put in place, so neither the EU nor the UK are destabilised by the process. Out of this sensibly extended and stable period, a new overarching EU-UK treaty could emerge - allowing the UK to technically leave the EU, whilst reforming free movement for the benefit of all and making European trade even freer.
I realise this is a forlorn political hope, born under the Côte d'Azur's optimistic sun. But I will say one final thing: when the big boys are stalking the playground, you don't start a fight with your friends.
Populism Rolled Back?
I talked to a French fund manager with $7 billion AUM about Le Pen,"She won't win and, even if she does, remember EU membership is written into the French Constitution. She won't have the parliamentary support to change that. There will be no Frexit." That was comforting. Mind you, judging by last year's events, I suggest everyone goes straight out and puts £10,000 on Frexit.
A Real Estate Government
Ministers and civil servants were at Cannes in force. They believe in the transformative power of real estate and infrastructure. Real estate is the right vehicle to address the UK's housing and infrastructure shortage and, through them, personal and regional inequality. The government's task now is to deliver on the White Paper's promise with the right mix of incentivisation, deregulation and targeted (not suffocating) tax.
Investors stand ready to respond. Everyone was talking about BTR, infrastructure investment and senior living and health solutions. Whatever happens politically, we all have to live somewhere, move around and deal with getting old. This means there are huge opportunities for the private sector to match its vast pension and equity resources to the great challenges of our age. L&G's Paul Stanworth was inspiring on this point, "all of us, working together, can solve issues that indebted and tax-strapped governments can't."
Remember Your Strengths
As a country and an industry, we have enormous strengths. We need to deliver on what we can control, and not moan about what we can't. Bill Hughes, of L&G, made a clarion call for optimism at our Carlton dinner. The UK is still a top six global economy and London a financial centre of galactic scale: 49% of the global derivatives market, 20% of the cross border lending market and 41% of the World's Forex market. More than New York and Tokyo combined.
London is again bathing in that inward investors' favourite cocktail: weak sterling, low interest rates and competitive pricing versus other global cities. London can power the UK post-Brexit and help spread wealth to the regions, but only if the government gets good sectoral deals on passporting, single market and talent access.
Have a Plan
Brexit is about to begin for real. The Bill has passed and Mrs May's pen hovers over the exit letter. Businesses need to start preparing and planning now: on trade, people, transition and timing. But an Eversheds Sutherland survey last week showed that 4/5ths of UK businesses have no plan for Brexit and are not planning to produce one. So as the Brexit bus leaves the stop, much of UK commerce is asleep on the back seat. They need to wake up and begin informed Brexit planning.
The whole western political and economic world is being remade: Trump, Brexit, NATO's very nature and the future of the EU project. We stand on moving ground. But we should be optimistic. We are human beings fated to live in history. We should be confident both as individuals and as an industry. If we are, we can help write the future and leave our children a strong legacy of problems solved and opportunities taken.
Bruce Dear, Head of London Real Estate, Eversheds Sutherland.