Capital returning but political risks and insurance availability top investor concerns
In an interview with Real Asset Insight at MIPIM 2024 in Cannes, Thomas Veith, Global Head of Real Assets at PwC, shared highlights from the latest Emerging Trends in Real Estate – Global Outlook report, jointly published with ULI.
“We have seen that the transaction activity came back,” Veith said. “We’ve seen the numbers for 2020, 2024, and that gives a good basis for the slightly, slowly starting capital markets and transaction volume outlook for this year already, 2025 and beyond.”
He noted that investor concerns vary by region. “Starting in America, you see the top two concerns are about the development of the interest rates. And the second most important topic is about housing availability, affordability,” he said. “Looking at Asia-Pacific, it’s about the low-yield environment in context of the increasing yields for bond rates, et cetera… and, of course, the international risks that are coming up.”
“In Europe, the top two concerns… it’s all about political instability. The trend to the political trend towards the right and, of course, the potential escalation of war,” he added. “We also look at the potential interest rate increase, but that comes lower ranked.”
Sustainability continues to shape strategy, but there is growing fatigue around excessive regulation. “ESG was often driven by, or sustainability was driven by, regulators where we already heard that the bit of frustration that it’s so overregulated and it’s not really the business case,” Veith said. “That’s a clear ask, especially in this more tricky, challenging environment for transaction activities… it’s that the investors asked for the return.”
Climate risk is another critical concern. “We see the floodings, we see the wildfires having a real impact on the real assets… they are more at risk,” he said. “A big topic is insurance premiums, especially now in the US and the general topic of insurability and the gap of assets that are not insurable anymore in the future is really widening. And there are more than 1 trillion asset damages in the US that were not covered.”
He noted a shift in Europe as well: “The insurance companies are telling us some of the assets might not be insurable going forward on a stand-alone basis. If you don’t get insurance in Europe, you can’t buy it from a governance point of view.”
Opportunities are emerging at the intersection of real estate and infrastructure. “We have seen the trend, yes, more data centre, more energy infrastructure… bringing real estate more as part of the solution of the energy issues,” Veith said.
On AI, he was direct: “AI is a big game changer… still in our industry on digital transformation, we are far behind to other industries,” he said. “If the really big global players are doing that, they will always have a competitive advantage on the cost side… If they don’t follow this trend.”
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