Letter from Cannes-do: the water's just fine

Cannes, France - Wow! That's the reaction of most observers after witnessing the recent MIPIM international property exposition here. The pace of new development in other-world markets is decidedly hectic.

So was the crowd in the Palais des Festivals in Cannes. Some 7,000 real estate professional from 55 countries attended the seventh annual event.

Many new countries in evidence included India, Estonia, Cuba, Saudi Arabia, Bahrain, the United Arab Emirates and Cyprus.

All told, 2,258 companies from 45 countries were brought together (790 of them were exhibitors).

The top exhibiting country was the United Kingdom, with 135 companies in attendance. Germany ran a close second with 130, and France came in with 108. Following in order were the United States (44), Spain (37), Belgium (37), Switzerland (35) and Russia (30).

Three major trends emerged from the '96 MIPIM - the acceleration in new business deals, the growth in strategic synergies and "competency grouping," and the dialogue between business projects and creativity.

New project launches were the order of the day. As usual, high-rise office buildings and topo tables got the most attention. Virtual tours of office floors were in evidence and drew good crowds, making it likely that this marketing tool will grow in prominence in future years.

Many cities linked together or with local developers to create "mega-stands." The cities of Berlin and Potsdam, Germany, for example, jointly occupied the largest stand ever seen at MIPIM with more than 330 sq. metres (about 3,500 sq. ft.). A huge topo table showing the Berlin cityscape included major new development projects located around the city including Daimler-Benz' new Potsdamer Platz development, scheduled for completion in late 1998.

Another huge model, of the City of London, was developed over the last four years and is quite a marvel of technological innovation, complete with a TouchLondon interactive system which identifies specific areas of the city by age, a City overview, a listing of property developers and a listing of professional services. The model now forms the centerpiece of a new central marketing suite in the heart of the City.

A 12-session conference program gave attendees a chance to sit in more formal learning sessions to hear about such diverse topics as Land acquisition in Eastern Europe (a well-attended event), Jump-starting liquidity for illiquid property markets with Goldman-Sachs' Daniel Neidich, The launching of CRE 2000 Europe by the International Development Research Council (IDRC) and The impact of new technologies on corporate use of space by the International Association of Corporate Real Estate Executives (NACORE).

Of particular note was the presence of the mayor of Moscow, Yuri Luzhkov, and the mayor of Warsaw, Martin Swiecicki. Each held formal news conferences before packed auditoriums, talking up the many development opportunities in Moscow and Warsaw.

Creativity did not confine itself to dealmaking, however. For the first time, MIPIM's "Man of the Year" honors went to an architect, Sir Norman Foster of the United Kingdom. Foster's work spans three decades, and his most notable recent projects include a new headquarters for Commerzbank in Frankfurt, Germany (to be that city's tallest), a new Airport at Chek Lap Kok in Hong Kong, which is the largest project of its kind in the world, and the new German Reichstag in Berlin.

Foster succeeds U.S. developer Gerald Hines of Houston, chairman and founder of Hines Interests Limited Partnership, who was lauded as MIPIM's 1995 Man of the Year.

From Russia with love

Surprisingly some of the biggest news on the international property front is coming out of Russia, and specifically Moscow.

Moscow is celebrating its 850th anniversary in September 1997, and in preparation for that event the city of Moscow put on a "we are a friendly place to develop property" face. "The participation of Moscow at MIPIM manifests our intention to implement programs and goals we announced so that, at the turn of the third Millennium, Moscow be transformed into a city deserving of being in all respects the largest state's capital," said Luzhkov.

Only recently, Moscow's city government has adopted decisions that make it more attractive for outside investors to enter the Moscow real estate market. According to the city, some $4 billion of international funds were channeled into the city last year, primarily for infrastructure improvements.

A major move is afoot to restore all of Moscow's churches to their former glory. At the same time, the city is eagerly encouraging development of major new business centers, office buildings, shopping centers and cultural areas. One of the most positive factors driving the validity of this push is the projected increase in Moscow's housing stock, which is expected to grow by some 3 million sq. meters (about 40 million sq. ft.) each year.

American observations

Here are a few observations by one bourgeois American in Cannes:

Interest in Eastern Europe is enormous and getting stronger. Capital from a variety of sources is available and investing in Eastern Europe at a growing rate. One American company of note, Golub & Co., Chicago, has made serious inroads into Warsaw, Poland, for example.

Moscow is serious about its new makeover attempts. But as always, politics plays a pivotal role in this region. If the Russian elections this summer endorse Boris Yeltsin over the Communists, the reforms will continue. There are even plans to build a separate zone in Moscow complete with skyscrapers (similar to the plan of La Defense on the outskirts of Paris).

The Far East remains a hotbed of new development, particularly in the office building sector. Later this year the gargantuan Petronas Twin Towers in Kuala Lumpur, designed by Cesar Pelli, will open, wresting the title of world's tallest building away from the Sears Tower in Chicago.

Another new tower, the Shanghai World Financial Centre in China, announced at MIPIM, will become the world's tallest in the year 2000, if all goes according to present plans. Designed by skyscraper veterans Kohn Pedersen Fox of New York and developed by Japanese developer Mori Building Development Co., it will stand some 1,600 feet tall.

In the retail sector, the outlet center concept is just now hitting Europe's shores. In particular, U.S.-based McArthur/Glen is transporting its own designs to the Continent in two new centers, one in Northwest England and the other in central France. Plans are to grow the concept into other countries.

America's own Bankers Trust Co., Lehman Brothers, Goldman Sachs and JE Robert Co. continue to make serious investment inroads into the European property markets. Look for more from these players, and others.

The World Wide Web continues to figure prominently in real estate discussions. Five of Europe's top property agents, Chesterton, DTZ Debenham Thorpe, Hillier Parker, Jones Lang Wootton and Richard Ellis, have formed a property marketing site on the Web to promote some of their leading properties. Called PropertyLink, it debuted April 1 with over 1,000 properties throughout the U.K. The Internet address is http://www.propertylink.co.uk.

The London Docklands Development Corp. (LDDC) was busy marketing its two proposed hotel sites at MIPIM, building on their recent office leasing successes.

Dockland sites are becoming hot development properties. Witness the Melbourne Australia Docklands, represented by Jones Lang Wootton sited next to the city's CBD. And there's the first phase of the redevelopment of Rio de Janeiro's docklands, which will include about 500,000 sq. ft. of retail, office, hotel convention center and cinema development.

EuroDisney Development is aggressively marketing the huge property surrounding its Disneyland Paris theme park located east of Paris as Val d'Europe, a master-planned community a la Disney Development Co.'s new Celebration community under construction in Florida.

IDRC Europe launched two new surveys at MIPIM. The first was a survey conducted by Ernst & Young of 50 European firms which confirmed that European companies are aligning their real estate assets with their overall corporate strategic goals and objectives. The second was conducted interactively at a conference in Barcelona, Spain, which revealed that most corporate real estate executives believe the pace of outsourcing will increase, though the defined benefits are still largely unknown.

MIPIM Awards

Every year, MIPIM's prestigious awards ceremony lauds outstanding new property developments around the world for their design and utilization. The 1996 winners were:

Refurbished Office Buildings Category and Jury's Special Prize - Specks Hof building, Bilfinger & Berger, Leipzig, Germany.

Office Buildings Category - Procter & Gamble Headquarters Building, Procter & Gamble, Aukett Associates, Surrey, United Kingdom.

Business Centers Category - Centre Nestle France, Nestle France, Noisel, France.

Shopping Centers Category - Friedrichstadtpassagen, Quartier 207, EP-EURO, Berlin, Germany.

Residential Developments Category - Residence Triades, Immflandria, Brussels, Belgium.

On the heels of its success with both the MIPIM and MAPIC property markets (MAPIC is a retail conference held in Cannes in November), the Reed Midem Organization is expanding into Asia with the launch of the first MIPIM Asia scheduled for September 1997.

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