WASHINGTON, D.C. —Flexibility, convenience, and ultimately commercial real estate’s resilience will drive the industry over the next decade as owners respond to and recover from the COVID-19 pandemic.
That’s according to Emerging Trends in Real Estate 2022, an annual report jointly produced by PwC US and the Urban Land Institute (ULI). The report includes proprietary data and insights from nearly 1,700 leading real estate industry experts, gathered both through 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 centers, and healthcare spaces, according to Washington, D.C.-based ULI.
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 found. Three-quarters of respondents in the 2022 survey report feeling confident making those same long-term strategic decisions compared to less than half in the 2021 survey.
Property investment is top of mind for institutional investors in both traditional and alternative sectors as risk remains low and interest rates stay attractive. Urban landscapes are facing change as new land uses and updated zoning allow markets to evolve.
All these factors remain under the cloud of climate urgency, prompting new ways of standardizing and measuring environmental, social, and governance (ESG) requirements. As businesses approach 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 sustainable advantages and value.
“There is clearly an 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 of ULI’s Center for Real Estate Economics and Capital Markets. “Yet the ground is shifting and we are seeing long-term and lasting changes in a range of key areas, including the relative prospects for property sectors and locations; the extent to which we use various property types; and our attitudes toward the industry’s role in climate risk and decarbonization.”
“An abundance of investable capital, low-interest rates, and a continued demand for many product types has created a positive environment for our industry,” adds Byron Carlock, PwC partner, and U.S. real estate practice leader. “However, not everything is rosy, and real estate still has its challenges ahead. There are rising costs, pending tax reform and new infrastructure spending that could impact the labor market.”
Carlock adds that there are various social issues that real estate stakeholders can take a leading role in helping to solve, specifically the creation and preservation of affordable housing, ESG-focused city planning, and 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.