WASHINGTON DC- The flexibility, convenience and ultimately resilience of commercial real estate will drive the industry over the next decade as landlords respond to and recover from the COVID-19 pandemic.
It depends Emerging Trends In Real Estate 2022, an annual report produced jointly by PwC US and the Urban Land Institute (ULI). The report includes proprietary data and insights from nearly 1,700 leading experts in the real estate industry, gathered through both in-person interviews and a survey.
Consumer expectations of traditionally designed spaces have changed and there will likely be a massive shift in the functionality of homes, offices, shopping malls and healthcare spaces, according to Washington-based ULI , DC.
Property markets that were once predictable will likely remain in a bubble of uncertainty, but decision-making confidence has improved since last year, the report said. Three-quarters of respondents in the 2022 survey say they feel confident making those same long-term strategic decisions, compared to less than half in the 2021 survey.
Real estate investment is a priority for institutional investors in the traditional and alternative sectors because the risk remains low and the interest rates remain attractive. Urban landscapes face change as new land uses and updated zoning allow markets to evolve.
All of these factors remain under the cloud of climate urgency, prompting new ways to standardize and measure environmental, social and governance (ESG) requirements. As companies address ESG issues in the real estate sector, it will be imperative for them to take a holistic approach and create a strong overall strategy to help create lasting benefits and value.
“There is clearly optimism within the real estate industry for its prospects in 2022 and there is undeniably a weight of capital available for investment,” says Anita Kramer, senior vice president at the Center for Real Estate Economics and Capital Markets. from ULI. “Yet the terrain is changing and we are seeing long-term and lasting shifts in a range of key areas, including the relative outlook of real estate sectors and locations; the extent to which we use various types of properties; and our attitudes towards industry’s role in climate risk and decarbonisation.
“An abundance of capital to invest, low interest rates and continued demand for many types of products have created a positive environment for our industry,” adds Byron Carlock, PwC Partner and Head of US Real Estate Practice. United. “However, all is not rosy and real estate still has its challenges. There are rising costs, pending tax reform and new infrastructure spending that could impact the labor market.
Carlock adds that there are a variety of social issues that real estate players can play a leading role in helping to address, particularly the creation and preservation of affordable housing, ESG-focused urban planning, and sustainability. neighborhood inclusiveness.
“It’s important that regulators, policymakers and business leaders work together to establish trusted standards that guide responsible behavior in our new post-pandemic reality,” says Carlock.
Like always, Emerging trends featured the top 10 “markets to watch,” and again, Sun Belt cities topped the list. Respondents were optimistic about the real estate outlook for these markets, given population growth, homebuilding prospects, affordability and job prospects.
The top 10 markets this year are:
- Nashville, Tennessee.
- Raleigh/Durham, North Carolina
- Austin, TX
- Tampa/St. Petersburg, Florida.
- Charlotte, North Carolina
- Dallas/Fort Worth
Other highlights of the report include:
- 82% of respondents consider ESG elements when making operational or investment decisions. A growing consensus holds that the real estate sector bears much of the responsibility for climate change and is uniquely positioned to put in place useful improvements to help mitigate impacts and increase resilience to environmental risks.
- Housing affordability has deteriorated during the pandemic as home prices and rents barely paused during the recession and then rapidly accelerated as the economy reopened. The costs of homes for sale and rentals are rising much faster in secondary and tertiary markets, as people fleeing expensive entry markets such as New York and San Francisco push up home prices in smaller destination markets. With housing production well below new household formations, affordability will likely continue to deteriorate in the absence of significant private sector and state interventions.
- Working from home was relatively rare for the US workforce before the pandemic, but it soared during the initial lockdown and is expected to maintain momentum among office workers. Nearly two-thirds of real estate professionals believe that less than 75% of workers will come into the office at least three days a week in 2022. In fact, industry leaders predict that office space usage will probably decrease between 5 and 15% during the year. next three years.
- REITs and private investors have been much quicker to embrace a wider variety of alternative sectors, ranging from niche housing types (student and senior housing) to specialized offices (life sciences and medical buildings) and warehouses (data centers and cold stores). These sectors are now attracting the interest of a wider range of investors as they generally offer higher returns at lower prices, often with limited risk.
It’s 43rd year of the Emerging Trends Report. It includes interviews and survey responses from nearly 1,700 leading real estate experts, including investors, fund managers, developers, real estate companies, lenders, brokers, advisers and consultants.
To view the full report, Click here.