The real estate industry set to play a more important role

The real estate industry is taking on an increasingly important role, experts agreed at Real Asset Media´s Trends 2022: Global Real Estate Outlook briefing, which took place this week in Brussels.

¨Our industry is being called upon to provide solutions to major social problems in relation to infrastructure, transport, affordable housing and of course sustainability,” said Byron Carlock Jr, real estate leader, PwC. ¨We´re having to rethink our built environment and it´s clear that steel and concrete are not the answer.”

Many opportunities have been missed in the past for improving neighbourhoods and cities, better walkability, easier and greener transportation. Now the industry is stepping up to the plate.

¨We´re now seeing the needs for ESG drive public funds, private funds and philanthropic funds to cooperate and deliver,” said Carlock. ¨We´re seeing positive examples around the world: Milan has reinvented itself, London has improved its railway system, Dallas has re-imagined the Trinity river connecting downtown and uptown.”

Real estate is also expanding into new areas like solar farms, onshore and offshore wind as well as data centres and science parks. ¨This new category of alternatives is enjoying the fastest growth of investors’ interest in the allocation wheel,” said Carlock. 

Investors as well as occupiers are increasingly focused on energy efficiency and carbon reduction. There´s a market-driven incentive to reduce emissions which is changing the landscape.

¨More and more occupiers now demand sustainability,” said Piet van Poppel, head of logistics transactions EMEA, country manager Belgium, CBRE Investment Management. ¨The life cycle of assets is becoming shorter: those built five years ago are already in doubt, and those built 10 or 15 years ago are now obsolete.” 

This is leading to more repurposing of buildings, a trend that is being driven by regulation but also by demand from all stakeholders – investors, tenants, landlords and lenders.  

¨We will see more and more funds in Europe focus on managing to green,” said Thomas Veith, partner, global real estate leader, PwC. ¨There´s a big pot of capital on one side and a lot of assets that need repositioning on the other, so it´s just a question of getting the timing right and of finding the right solutions.”

The need is clear: in the US 80% of office stock was built in the 1980s or before and it needs to be assessed to determined how ESG compliant it can be made to be. It is a similar situation in Europe, where most offices are now obsolete not just from an ESG point of view but also from occupiers’ perspective. 

ESG is transforming the industry, but technology is another driver of change in real estate, which had been lagging behind other sectors but is catching up fast. Energy efficiency and digitalisation are likely to be the future twin engines of real estate.

¨Tech has taken leaps forward in the last few years, and improved use of technology is a big part of how our industry matures and grows,” said Carlock. ¨Think of geospatial analysis, improved energy management systems, the interaction of buildings with parking solutions, maintenance solutions and security solutions.”