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Price Waterhouse Coopers has released its annual “Emerging Trends in Real Estate” report, which was drawn up in cooperation with the Urban Land Institute. It describes the trends in the global property market based on information and opinions collected from the largest property investment companies in Europe and the rest of the world (funds, institutional investors, asset managers, global consultants and bankers).
The specialists involved were asked for their outlook on the directions that their decisions should take, based on all the intrinsic and extrinsic factors that might influence their businesses.
They all agreed that property was still a class of assets that generated an acceptable yield. They felt that the pandemic had brought no surprises, but had only speeded up structural changes that were already under way and made them disruptive and challenging. Examples are:
– The social impact of the pandemic is forcing owners and occupiers to regard a property as a service and a dynamic operational asset, meaning that both have to find new forms of relationship and business operation.
– Technology has proved to be a safe vehicle to take investments through the pandemic storm into the sunlight, both for owners managing buildings and as a tool for fostering users’ health and safety.
– Already burgeoning digitisation has boomed, forcing growth in the logistics sector and data centres.
– Rented residential is once again attracting many investors because of its old virtue: security of its yield.
But there are certainties that will influence the paths that property businesses take: more working from home, more online shopping and less international travel. There are issues that have risen to the top of managers’ and investors’ concerns: the health and wellbeing of people in the workplace (wherever that workplace may be), the role of the built environment and its impact on society, as well as the incorporation of ESG (environmental, social and governance) values in decision making.
The interviewees’ expectations for the property business in upcoming years can be summed up as follows:
Many of them expect a fall in income and loss of jobs in 2021 as a result of the nosedive in 2020, though they are confident in the growth of the economy, albeit slow, over the next five years. Their greatest concerns are housing affordability, social inequality and the ESG agenda.
Many regard deglobalisation as a reality, given that the pandemic has obliged all sectors of society to focus on domestic issues. This will attract even more investment into logistics, with greater focus on local policies that will impact property.
Countries’ monetary policies have stimulated demand for core property investments due to the need for yield, and most investors are looking to buy in 2021.
There is an important trend in immediate investment decisions towards flexible use of buildings. It has actually become a decisive factor when it comes to buying. The way buildings are used is not only changing fast, but has also become a crucial issue.
All the macro-trends that were accelerated by the pandemic include environmental priorities, the technology highway and diversity.
Where the environment is concerned, the survey respondents expect a huge impact of climate change on the whole property industry. Energy efficiency, carbon emissions and climate adaptation will play a decisive role in the purchase, construction, maintenance and repurposing of their assets over the next five years.
In terms of technology, it is clear that remote work will have a permanent influence on the office sector and the way in which people choose to live. The massive turn of retail to online shopping will have a decisive impact on logistics buildings and data centres. We can also expect technology directly associated with property information and management and its relationship with consumers to transform all activity over the next 30 years.
A concern for social diversity is common to most investors. Gender, socio-economic, racial and minority ethnic diversity is regarded as a natural evolution towards a balance in their organisations. Inclusion means different views, better results, greater risk protection and a stronger ability to adapt to change.
Lisbon has been on the list of global property investment cities for several years now. It is in 15th place in markets to watch, with an average value, close to cities such as Warsaw and Stockholm and ahead of Copenhagen and Luxembourg among the 31 cities considered.
At the top of investment favourites for 2021 are cities such as Berlin, London, Paris, Frankfurt and Amsterdam, with above-average investment intentions.