Despite challenges the outlook is positive for global real estate
Despite multiple challenges and headwinds, the property sector will continue to attract capital and will end the year on a high, delegates heard at Real Asset Media´s Trends 2022: Global Real Estate Outlook briefing, which took place this week in Brussels as well as online.
¨We have not seen these levels of uncertainty and volatility for twenty years,” said Thomas Veith, partner, global real estate leader, PwC. ¨But the good news is that globally allocations to real estate are still high and will continue to be. This market environment brings opportunities and more investors are interested in real estate. The glass is half full.”
The industry has to deal with geopolitical uncertainty and low market sentiment, rising interest rates, increases in construction costs and supply chain disruption as well as the overarching need to reduce emissions and deal with embodied carbon.
¨I think it´s one of the most exciting times to be in real estate precisely because of all these challenges,” said Byron Carlock Jr, real estate leader, PwC. ¨Everything is up in the air and real estate is still seen as an inflation hedge. In these uncertain times people want something that they can touch, hold and feel.”
As equities have fallen, most investment managers are increasing their allocations to real estate, he said: ¨There is more dry powder going into real estate in this recession than we´ve ever seen, some $400 billion of capital waiting to be invested.”
The question is where investors will choose to deploy their capital – Asia, North America or Europe. The dollar´s strength against the euro is clearly an incentive for US capital to look across the Atlantic.
¨US investors who are inclined to invest in Europe look at exchange rates and see the Continent´s on sale,” said Carlock. ¨Assets are a lot more affordable, but geopolitical issues and energy prices are a concern, as are leadership and regulation. There needs to be a new level of confidence in Europe.”
Investors are divided into two very distinct camps at the moment: some are sitting on their hands and waiting for the fog to lift. Others, especially opportunistic and value-add capital, are exploiting weaknesses and taking full advantage of the opportunities the market offers.
The wait-and-see approach is having an impact on the market. ¨In the last quarter transaction volumes in Germany were 40% down compared to last year,” said Veith. ¨There may be some reluctance to invest right now, but we expect a really active market by the end of the year.”
In this shifting landscape the very nature of real estate is changing. ¨There has been a real transformation,” said Piet van Poppel, head of logistics transactions EMEA, country manager Belgium, CBRE Investment Management. ¨Real estate is less financially driven and is more based on an understanding of our tenants and clients and on navigating the big changes that are happening around us.”