Reflections from MIPIM: Evolving playbooks in a changing market
Sentiment at MIPIM reflected this divergence. Some investors remain cautious, citing slower capital markets and continued uncertainty. Others are moving with greater urgency, supported by stronger pipelines and a focus on deploying capital.
That contrast captured something important about where the real estate industry now finds itself: a transition to a more complex, multi-speed market. We’re no longer operating within a single cycle or a single narrative. Instead, the industry is navigating the intersection of slower capital markets, geopolitical and rapid technological change. And while each of those forces matters on its own, it’s their interaction that is reshaping the outlook for the industry.
For leaders, the implication is clear. Performance will depend less on market timing and more on strategic positioning and execution.
A market in transition
Liquidity remains down since 2022, and although the diphas been shallower than in the post–global financial crisis period, the recovery has also been slower. The result is a prolonged period where, although not in distress, the industry hasn’t been particularly liquid.
At the same time, traditional distinctions between cyclical and structural forces are becoming less useful. In addition to market cycles, real estate leaders are now contending with broader global dynamics, particularly geopolitical fragmentation and technological acceleration, that cut across both categories.
Geopolitics moves centre stage
Geopolitics has shifted from a background consideration to a core strategic concern. Capital flows are becoming more selective, and the relative attractiveness of regions is converging. The long-standing preference gap between Europe and North America has narrowed, reflecting a more balanced and more uncertain global outlook.
Trade policies in several markets are evolving, with implications for capital flows – particularly in sectors linked to defence, infrastructure, and strategic supply chains – changing priorities around resilience and ownership of related real estate. Cross-border flows of capital and labour face increasing constraints, and consensus around global priorities, particularly climate change, is becoming harder to sustain.
This changing backdrop is altering investor behaviour. Limited partners are recalibrating risk appetites, not toward safety at all costs, but toward more modest and more legible risk profiles. Core+ and value-add strategies are attracting renewed interest. At the same time, appetite for both opportunistic and super-core strategies has declined in the past year, according to our annual survey of approximately 300 LPs. For investors operating in this less predictable environment, this points to a need for a more selective search for returns.
From asset allocation to product excellence
Selectivity is also reshaping how performance is defined. A consistent theme across discussions at MIPIM this year was that returns are increasingly driven less by sector allocation and more by performance within sectors. The source of outperformance is shifting from choosing the right category to creating the right product.
The rise of real estate as a product, rather than simply a financial asset, places greater emphasis on the quality of the operating model, the relevance of the offer, and the ability of an asset to meet specific user needs as important differentiators.
AI: from promise to execution
Alongside geopolitics, AI was a recurring topic at MIPIM – both in terms of what it can do for the industry today, and what it may mean for society more broadly. Most discussions centered on one question: how to practically and successfully capture value from AI today? The answer always comes back to the fundamentals. Strong AI outcomes depend on three enablers:
- robust and accessible data architecture
- clear prioritisation of high-impact use cases by leadership
- redesign of core processes to enable automation and better decision making
In an industry often characterised by lean teams and fragmented data, the challenge is selecting the right areas of focus, with clear ROI and leadership support to justify investment.
At the same time, AI is beginning to reshape competitive dynamics. New entrants may be able to build more automated and lower-cost operating models from the outset, without legacy systems. For incumbents, the question is not just whether this shift will occur, but how quickly they can respond if it does.
Building robust portfolios
In a more volatile and less predictable environment, resilience alone is no longer sufficient. The emerging priority is to build portfolios and platforms that can benefit from disruption, not just withstand it.
This requires three shifts:
- a shift from allocation to execution, with greater emphasis on asset-level excellence rather than sector rotation
- more explicit alignment to global trends, including data centres linked to AI, logistics tied to supply-chain resilience, and infrastructure connected to national industrial priorities
- the systematic use of AI as a practical lever to improve the speed and accuracy of decisions, while protecting governance and trust
Looking ahead
The real estate industry is entering a new phase. Cycles still matter, but they are now overlaid with structural forces that are less stable, less correlated, and more consequential than before.
In this environment, waiting for clarity is unlikely to be sufficient. Outperformance will depend on the ability to act with conviction amid uncertainty, reshaping portfolios, upgrading capabilities, and embedding new ways of operating.
In a more fragmented and less predictable market, performance is likely to depend less on timing cycles and more on how effectively leaders position assets, deploy capital, and execute at the asset level. The leaders who adapt fastest will be best positioned to capture the opportunities it creates.
Ben Dimson is a Partner at McKinsey & Company and Co-head of McKinsey's Real Estate practice in Europe. He is an expert in advanced analytics and innovation, serving companies on all things real estate, with a focus on the opportunities created by digital disruption.
Jules Barker is an Associate Partner at McKinsey & Company. A digital transformation leader in McKinsey's European Real Estate practice, he helps investors, operators, and service companies navigate disruption, advises on digital transformation, new operating models, growth strategies, and helps to shape McKinsey's thought leadership.