Real estate lawyers set for 'unspectacular' 2011 as market outlook remains low

Given last week's headline-grabbing arrest of property tycoons Robert and Vincent Tchenguiz as part of a Serious Fraud Office (SFO) investigation into the collapse of Icelandic bank Kaupthing, there's no doubt which topic dominated discussion at the mammoth real estate schmooze-fest that is Marche International des Professionnels d'Immobilier (MIPIM).

But while even in their absence the Tchenguiz brothers' yacht party was clearly the place to be in Cannes, property lawyers more generally are not in the mood for parties right now. As one partner comments: "The one night we went to Hotel Martinez it was empty as everyone had gone somewhere cheaper... we're still a long way from the exuberance of pre-2007, after all."

It's true that MIPIM attendance was a long-way off the halcyon days of the property boom, but with around 19,000 registered to attend and the likes of Hogan Lovells, Freshfields Bruckhaus Deringer and Wragge & Co hosting boats, it wasn't all bad either. Certainly the difficulty tracking down property lawyers to speak to for this article suggests a good chunk of the senior real estate legal community took one for the team and bravely headed for the French Riviera.

While property lawyers, by nature an upbeat breed, were putting a positive spin on the spotty attendance - "easy to get around", "more time to meet clients", etc - the flat mood at MIPIM reflects the stubborn uncertainty over what the year will hold. While activity levels are certainly much better than at the bruising intersection between the credit crunch (mid-2007) and the following year's banking crisis, few are predicting a significant increase in workload for 2011.

Interest in prime London real estate from private equity houses and sovereign wealth funds and restructuring work from banks means there are pockets of deal activity, but marquee deals are still few and far between. Adrian Bland, who heads up Wragges' real estate group, comments: "People are still quite cautious about the property market. They think the economy is getting better and there will be quite a lot of investment opportunities, but the people who were on the fringe during the boom time are out in the cold now."

Hogan Lovells' Michael Stancombe added: "There's work coming from the release by the banks of debt and loan portfolios and then there's the continuing story about the overwhelming focus on prime central London investments. That said, for the vast majority of real estate practices it's going to be a fairly unspectacular year."

A significant fear now, though, is that unspectacular could be as good as it gets. Within days of news of the Tchenguiz brothers' involvement in the SFO's investigation breaking, Vincent Tchenguiz saw part of his property empire collapse, with various holding companies within his property management group Peverel entering into administration. The news, which followed months of negotiations with the company's lender, Bank of America Merrill Lynch, is a prime example of the fragility of the market right now. And while it borders on crass to mention it, recent turmoil and tragedy in the Middle East and Japan are hardly going to help a sector ever-dependent on the elusive investor feel-good factor.

As Herbert Smith partner James Barnes comments: "In London it seems that confidence is returning - occupiers are taking on more space, which is reducing the supply of quality space available. Planning activity is increasing, which is a good indicator of development to follow. But who knows what will happen? The global economy is delicately balanced and the problems in North Africa and Japan have not yet been factored in."

Real estate lawyers set for 'unspectacular' 2011 as market outlook remains low

Given last week's headline-grabbing arrest of property tycoons Robert and Vincent Tchenguiz as part of a Serious Fraud Office (SFO) investigation into the collapse of Icelandic bank Kaupthing, there's no doubt which topic dominated discussion at the mammoth real estate schmooze-fest that is Marche International des Professionnels d'Immobilier (MIPIM).

But while even in their absence the Tchenguiz brothers' yacht party was clearly the place to be in Cannes, property lawyers more generally are not in the mood for parties right now. As one partner comments: "The one night we went to Hotel Martinez it was empty as everyone had gone somewhere cheaper... we're still a long way from the exuberance of pre-2007, after all."

It's true that MIPIM attendance was a long-way off the halcyon days of the property boom, but with around 19,000 registered to attend and the likes of Hogan Lovells, Freshfields Bruckhaus Deringer and Wragge & Co hosting boats, it wasn't all bad either. Certainly the difficulty tracking down property lawyers to speak to for this article suggests a good chunk of the senior real estate legal community took one for the team and bravely headed for the French Riviera.

While property lawyers, by nature an upbeat breed, were putting a positive spin on the spotty attendance - "easy to get around", "more time to meet clients", etc - the flat mood at MIPIM reflects the stubborn uncertainty over what the year will hold. While activity levels are certainly much better than at the bruising intersection between the credit crunch (mid-2007) and the following year's banking crisis, few are predicting a significant increase in workload for 2011.

Interest in prime London real estate from private equity houses and sovereign wealth funds and restructuring work from banks means there are pockets of deal activity, but marquee deals are still few and far between. Adrian Bland, who heads up Wragges' real estate group, comments: "People are still quite cautious about the property market. They think the economy is getting better and there will be quite a lot of investment opportunities, but the people who were on the fringe during the boom time are out in the cold now."

Hogan Lovells' Michael Stancombe added: "There's work coming from the release by the banks of debt and loan portfolios and then there's the continuing story about the overwhelming focus on prime central London investments. That said, for the vast majority of real estate practices it's going to be a fairly unspectacular year."

A significant fear now, though, is that unspectacular could be as good as it gets. Within days of news of the Tchenguiz brothers' involvement in the SFO's investigation breaking, Vincent Tchenguiz saw part of his property empire collapse, with various holding companies within his property management group Peverel entering into administration. The news, which followed months of negotiations with the company's lender, Bank of America Merrill Lynch, is a prime example of the fragility of the market right now. And while it borders on crass to mention it, recent turmoil and tragedy in the Middle East and Japan are hardly going to help a sector ever-dependent on the elusive investor feel-good factor.

As Herbert Smith partner James Barnes comments: "In London it seems that confidence is returning - occupiers are taking on more space, which is reducing the supply of quality space available. Planning activity is increasing, which is a good indicator of development to follow. But who knows what will happen? The global economy is delicately balanced and the problems in North Africa and Japan have not yet been factored in."