The event was of course conducted against a global backdrop of idiosyncratic financial markets awash with inter-bank suspicion, a frantically snorkelling US Dollar, Central Banks clad in seven league boots hastily injecting additional cash into the system and the Federal Reserve poised to surgically remove a hefty slab of basis points.

For my part, I was broadcasting breaking real estate news via Dubai Eye´s Property Sunday alongside the highly accomplished Siobhan Leyden, aided by liberally erudite contributions from CB Richard Ellis´s Nick Maclean, Managing Director Middle East, and Dr Nick Axford Head of EMEA Research and Consulting. While there was much ado about Europe in all its geographic persuasions, from a journalistic perspective I merely had to utter the call sign, ´I am based in United Arab Emirates´ to be inundated with interest and proffered business card exchange. For whilst there are many weather eyes fixed on what is happening in Europe and North America, the search for a less fraught home for both institutional and high net worth individual investment in emerging markets is experiencing a major surge. As the regulation count rises, the UAE appears to be attracting intense attention.

However, CBRE as an advisory, are acting on behalf of many a Middle East investor in search of increasingly attractively priced investments in established powerhouse markets that are unlikely to remain stalled for the duration. For them it is a bi-directional pipeline, with perhaps the hindrance factor of limited stock availability as per the prevailing delivery status quo in the UAE market but a massive amount in the aforementioned culvert.

Despite a stalwart UAE presence, all compass points in Europe as well as Russia held centre stage at MIPIM, with big cities and important regions presenting both significant domestic infrastructural investment and a united front to the world. So what exactly has happened in the more northerly commercial property markets according to team source CBRE? A few key observations ensue:

Grand finale figures for 2007 evidenced a European commercial real estate investment market that touched 246 billion Euros, 6 per cent greater than what were considered record levels a year earlier.

Stifled credit markets began to take their toll in the fourth quarter, but the effect was largely limited to the United Kingdom. Actual levels of mainland Europe investment activity during the same period hit a record high of 45 billion Euros, surpassing the previous peak of 42.5 billion Euros set in the last three months of 2006.

Property values adhered to a similar pattern. Yields in the UK rose, with prime office space located in the City of London reflecting a 150 bps increase against a low point in mid 2007. The IPD All Property monthly index described a 13.5 per cent descent in UK capital values. This promising upward shift in yields has already lured a segment of investors back into the Central London market and indications are that prime yields are beginning to stabilise at close to current levels. By contrast prime yield mobility in most European cities has been far less significant with general yield increases occupying a band between 20 to 40 bps.

One explanation for the yawning gap between yield trends in the UK compared to those in Continental Europe is the difference in rental growth in the latter’s main office markets. In the previous twenty four months up to December 2007, prime London rents have increased by 50 per cent in the West End and 42 per cent in the City. Beyond Central and Eastern Europe, only Madrid has come close at 47 per cent, with Paris at 17 per cent, Frankfurt at 16 per cent, Munich at 5 per cent and Milan at 4 per cent, lagging at considerable distance, although greater potential remains for upward movement given that their underlying economies remain solid.

Nick Axford comments, “What is clear is that yield shift is no longer the driver of real estate returns and that out-performance in 2008 is most likely to come from rental growth. This makes the economic outlook key to how the market evolves this year. If the European economy remains relatively stable, the underlying fundamentals of the market will remain attractive.”

The continuation of specific long-term trends in 2007, in particular the sale of property by owner-occupiers, where sales in this category totalled more than 45 billion Euros by year end (18.5 per cent of all transactions) represented year-on-year growth of 33 per cent. Headline deals like Banco Santander’s sales in Spain and the HSBC tower at Canary Wharf sucked in news coverage of course. However this inclination continues to bite into European markets, extending to a wider spread of countries, including France, Italy and Spain.

Despite deceleration in the UK market, Central London powered forward as the largest European investment market, topping total sales activity of 31 billion Euros in 2007.

2007 Top ten European investment markets

Turnover ˆ million % of European Market*
London 31,290 16.1
Paris 19,835 10.2
Frankfurt 8,366 4.3
Munich 6,555 3.4
Stockholm 6,020 3.1
Berlin 5,949 3.1
Hamburg 5,122 2.6
Madrid 4,042 2.1
Moscow 3,367 1.7
Amsterdam 2,767 1.4
* Excluding indivisible multi-city portfolios

Overall, eight of the top ten investment markets went unchanged from 2006. However, the two new entrants were significant:
-Moscow, with total sales of 3.4 billion Euros, demonstrates the rapid growth of the Russian market; and
-Amsterdam, with a volume of 2.8 billion Euros, driven by an improving Netherlands economy and investor sentiment veering toward secure transparent markets in the second half of the year.

An increasingly lofty entry level is a notable characteristic of last year´s big league. Amsterdam became the tenth ranked market by activity in 2007. Madrid occupied this position in 2005, with a turnover of a mere 1.5 billion Euros. By end of year 2007, some 22 markets had realised investment market activity in excess of 1.5 billion Euros.

The strongest percentage growth (year-on-year) was manifested in smaller European market, for instance, activity in Hungary and Luxembourg more than doubled. At the same time major growth took place in Czech Republic, Netherlands, Denmark, Portugal, Spain and Romania, with across the board increases greater than 40 per cent. Apart from the UK, only Sweden, Ireland and Poland registered noticeable declines in investment fortunes.

Jonathan Hull, Executive Director of EMEA Capital Markets, CB Richard Ellis, observes, “It has been interesting to see how quickly some investors have come back into the Central London market. In the first few months of 2008 there have been a number of notable deals. There does, however, remain an air of caution, as these deals have generally involved ‘motivated’ sellers such as the UK Open-end funds and REITs.”

“On the continent, the active parties at the moment are exactly those we would expect, given the current market conditions. The sellers are REITs and other listed property companies and the higher leveraged investment funds. The buyers are those who use a high proportion of equity, such as the German Open-ended Funds, who have access to institutional capital sources,” he added.

Advanced levels of Sovereign wealth fund investment emerging from the Middle East, is of course common knowledge, with much beyond trophy assets in mind. Despite the dip in Europe´s capital values, market fundamentals are bearing up under the strain. Meanwhile overseas investors continue to flock to the UAE and the number of subjective conferences conducted by major external influencers continues to increase. One gets the impression that this year´s MIPIM, with due deference to the recent Dubai World Cup, has broadened the starting gate in both directions.