A story in Nice-Matin set the tone for the MIPIM show in Cannes last week. The 17th annual gathering of international real estate investors, the local daily reported, would break new attendance records (the final count, according to sponsor Reed MIDEM, was approaching 20,000). But the truly significant metric, according to Nice-Matin, was the yacht market: Demand for charters during MIPIM week now rivals that of the Cannes Film Festival week in May. The only difference is that in March, it’s institutional investors, dealmakers and brokers who are piling into launches and clambering up gangways in the marina, not film stars.

The gleaming cruisers and vintage sailboats bobbing in the harbor and gently swaying in the marina — sea-going hospitality suites and deal salons for Morgan Stanley, DTZ, Eurohypo and dozens of brokers and investment firms — are an apt metaphor for the message of MIPIM: The global real estate market is floating on an ever-rising tide of liquidity.

In 2005, according to Jones Lang LaSalle, a stunning $475 billion poured into commercial real estate investments around the world, a 21% jump from 2004. And that figure will almost certainly be surpassed in 2006, as investors scour the globe in search of yield. “Last year, for every dollar of completed transactions, there were two dollars chasing the deals,” says Tony Horell, CEO of Jones Lang’s international capital group. “This year there are three dollars.”

Hundreds of exhibitors, representing cities from Coventry to Kiev and Singapore to Silesia, crowded the Palais des Festivals to try to scoop up some of that money. Ski resorts in former Soviet republics, the world’s tallest residential tower (in Dubai) and Estonian shopping centers all vied for attention.

Not every project will get off the ground, but odds are in favor of any developer with a plausible story, no matter how implausible the location. “Investors are looking further and further from home base for returns,” notes Paul Richards, head of European capital markets research at JLL. That means pushing further into Eastern Europe, beyond Poland and Hungary and the Czech Republic, where a decade of commercial redevelopment has flattened cap rates.

Now, the action is shifting to places like Bulgaria, where developers say it’s time to pounce before the nation enters the European Union in 2007 and prices rise. Another much-hyped destination is Turkey, whose entry into the EU is still being negotiated. “Turkey is wide open,” says Tim Stketchley, managing partner of Cushman & Wakefield’s capital market group in London. “In 2020 there will be one global mega city in Europe — Istanbul.”

Where is all the money coming from? According to the experts at Cannes, the dynamics that have been driving more capital into real estate assets in the U.S. are at work across the globe. With returns in equity markets modest, institutional investors everywhere are upping allocations to real estate. And, even in places like Germany, where cap rates are evaporating, there is still an attractive interest-rate spread in commercial real estate investing. Finally, and most significantly for the long-term, there are hundreds of millions of aging citizens in North America, developed Asia, and Europe who are looking for the steady returns that they (or their employers or governments) believe can be achieved by owning commercial real estate.

“There is no end in sight to the weight of money coming into commercial real estate capital markets,” Kelly Whitman, head of European research services for Property & Portfolio Research, told attendees at a session called “Extreme Demographics.” Forecasting trends through 2050, Whitman added, “Aging populations are spurring real estate investment — by pension funds and individuals — as the need switches from growth to income.”

While the major industrial economies continue to attract the most investment (88% or the $164 billion in cross-border deals were in North America and Europe), it’s increasingly clear that the flow of funds will start moving from west to east — attracted by the fastest growing economies, China and India. “The story in 2005 was the flow of institutional dollars from the United States into Europe,” JLL’s Richards says. In the next few years, he says, JLL sees the greatest opportunities in Southeast Asia, a recovering Japan and in coastal China. In the medium term (four years out), the firm favors the so-called BRIC countries (Brazil, Russia, India and China) as well as Mexico, Turkey, Romania, Bulgaria and Russia. Long-term bets are on inland China and South America, he says.

Richards says that pricing is “rational” at the moment — despite sub-5% yields in some sectors — because interest rates have not risen as much as had been feared going into 2005. He says there is a debate within the firm as to whether cap rates will bottom out late this year or in 2007. The bottom line, he adds, is that you’ll see more money going to exotic places. “There is still a lot of room in less-developed, riskier markets in the developing world,” he notes. A sign of the times: In September Reed is sponsoring the first MIPIM Asia in Hong Kong. Reserve your junk today.