Good morning from the Financial Times.
Today is Tuesday, February 4th, and this is your FT News Briefing.
Donald Trump is keeping everyone on their toes when it comes to tariffs, and commercial real estate is slowly building itself back up.
Plus, can Europe still be a major player in the artificial intelligence race?
I'm Sonia Hudson, and here's the news you need to start your day.
U .S. President Donald Trump paused his 25 % tariffs on imports from Mexico and Canada yesterday.
They were supposed to go into effect at midnight, along with a 10 % levy on Chinese goods.
Both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Shanebaum agreed to a month -long pause with Trump.
Each of them promised to send 10 ,000 military personnel to the border to stop the flow of fentanyl.
Next up is China's President Xi Jinping.
The White House said Trump will get him on the phone soon.
commercial real estate has had a rough couple of years but the industry is starting to see some signs of life now here to explain is the ft's joshua oliver hi josh hi so before we get into this rebound tell us a bit more about why the sector was struggling so if you look back You know, you had a huge
peak in commercial real estate in and around the end of 2021, the beginning of 2022.
And that was really driven by super low interest rates coming out of the pandemic.
But then as the interest rate environment started to change, those debt costs started to go up by a lot.
And then you had some sort of geopolitical shocks, which don't help sort of confidence in the broader economy.
And so that sent real estate into a complete tailspin.
And you saw the values of assets on average in Europe coming down by nearly a quarter and the volume of transactions coming down by more like a half.
So this is one of the worst downturns that we've seen in commercial real estate since the global financial crisis.
And now people are hoping that's in the rearview mirror.
But how much of a recovery are we talking about here?
I mean, nobody is popping champagne at any of the commercial real estate brokerages after the year that we've had, if you look at Europe, and the trend is similar in the U .S.
as well, volumes of investment.
So, you know, the value of properties being bought and sold is up by about 4 % in 2024.
And we are still sort of at half the level of investment volumes that you saw at the peak in 2021.
So, you know, it is the kind of the beginning of, I think, a long road to recovery.
Finally, moving back in the right direction.
And what's behind this pick up in deal -making?
I mean, why are investors excited about the sector again?
So the main factor is central banks are starting to cut interest rates.
That's the starting gun for the recovery in commercial real estate because everything is debt -driven here.
But I think there are other factors as well.
Real estate is something that moves very slowly.
And when you have sort of a sudden big downturn, it takes a while for the owners of assets who want to be sellers of assets to actually accept that the number that they have on their piece of paper is not the number they can sell this building for.
And what starts to reopen the transactional markets is when the sellers go, all right, things are not going to get better.
We have to accept the new reality, take a loss, and move along here.
Well, how have commercial real estate investors adjusted to this new reality that you're talking about?
You've seen a really big shift or sort of two shifts over recent years.
If you go back to really traditional commercial real estate portfolio, it was offices, retail, and then you had warehousing starting to come in as a sort of third major category.
And that was a long standing trend that was really driven by more and more stuff being sold online, more need for warehouses for delivery.
So that's continued.
Those two other big traditional sectors, office and retail have been very challenged.
And so that has led, I think, to a search for other places to deploy capital in real estate.
I think what these investors are starting to recognize is the shortage of housing that you have in many of the countries where they want to invest.
And so I think the move into all sorts of residential sectors has been the biggest shift in the real estate market that we've seen in recent years.
What kind of risks still exist for commercial real estate?
I mean, is this pivot, is this pickup and dealmaking going to be enough to really revive it?
Yeah, there's considerable risks out there.
I mean, the biggest thing that people are still worried about is it's actually quite surprising how little distress we've seen in the commercial real estate market.
There have obviously been distressed sales of assets and people who couldn't pay their loans, but it's not been a huge market -wide phenomenon in the way that most people would have predicted if you went back a couple of years.
But some of that potential distress is still lurking out there.
You know, it seems bizarre that it would take this long, but this tends to be the pattern in real estate that people will hold on and try and keep quiet for as long as they can.
And then only when finally, you know, the music stops will you start to see those distressed assets float to the surface.
Joshua Oliver is the FT's Property Correspondent.
Thanks, Josh. Thank you.
inflation is still hanging around the eurozone the bloc reported yesterday that the rate of price increases unexpectedly ticked up last month to two and a half percent just a few months ago it was at 1 .7 percent the european central bank wants to get that number to two percent and keep it there, which might be
tough with U .S. President Donald Trump threatening tariffs left and right.
For what it's worth, though, the ECB seems unfazed by the recent rise in inflation.
That's because the figures have still been lower than what the central bank had forecast.
So the uptick is not expected to affect how the ECB handles interest rates over the next couple of months.
The French artificial intelligence company Mistral was supposed to be Europe's answer to U .S.
big tech. But despite a $6 billion valuation and the backing of Microsoft and the chipmaker NVIDIA, it has struggled to keep up with its larger rivals in the AI race.
Throw in China's DeepSeek earthquake from last week, and a lot of people are asking, has Mistral missed its moment?
The FT's Tim Bradshaw has been writing about this, and he joins me now.
Hey, Tim. Hey, Sonia.
So first off, tell me a bit more about Mistral.
Why were people originally so excited about it?
So this company burst onto the scene middle of 2023 when there was still a lot of excitement and anxiety about the ChatGPT moment and how OpenAI looked like it was really running away with the whole game in artificial intelligence.
And there's been anxiety in Europe for years about the fact that there was no big tech European player to take on Google or Meta or Microsoft.
And then suddenly, this trio of really, really well -regarded AI researchers who'd previously worked for Google DeepMind and Meta had left to launch this new company.
And within four weeks of founding it, they'd raised 100 million dollars.
I mean, this was an ambition which European tech has looked for and never found for years.
And then they came out with a really, really great couple of models straight out of the gates.
So it sounds like Mr.
All started out with a lot of promise, but now some people in Europe are starting to worry about it.
Why is that? I think there is still an assumption that leadership in AI requires an enormous investment in computing power, which is obviously something very expensive.
And the American AI companies, OpenAI, Anthropic, and Elon Musk's xAI have each raised 10 times as much as Mistral has.
And so if you can afford to invest that amount of money in NVIDIA chips and the data centers that host them, the expectation is that that means that you'll be able to really run ahead a lot faster.
And there is this sort of moment that Sam Altman and OpenAI and others sort of look to of artificial general intelligence, this kind of moment when AI is as good as any living human at any given task.
And the company that gets there first is seen as really kind of having her sort of key to the future.
And if that was what people were hoping Mistral would be able to keep up with, the funding race seems to be leaving them behind a little bit right now.
Okay, so Mistral maybe hasn't been keeping pace on funding, but it has produced some solid models.
Then we saw just recently, though, this Chinese company DeepSeq really rock the AI world.
It released a model using way fewer chips than its competitors.
How does that complicate Mistral's standing?
It complicates it in many ways.
I mean, it could be seen as an endorsement of Mistral's approach because Mistral's pitch was exactly the same as what DeepSeq's doing, which is that we don't need Silicon Valley style capital to make real progress here.
And they have demonstrated that they can do an awful lot at Mistral with far, far less.
But if that argument was true, you've sort of got to ask, well, why wasn't it a European company that was setting the world on fire with this breakthrough AI that could be done on a shoestring rather than a Chinese competitor?
And so the onus is on Mistral to show that they can do DeepSeek efficiency just as well as DeepSeek does, but perhaps in a way that is packaged for sovereign European customers and governments.
Tim Bradshaw is the FT's global technology correspondent.
Thanks, Tim. Thank you.
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