Emerging Trends Report Finds Positive Commercial Real Estate Environment
Significant capital, low interest rates and continued demand for many product types are creating a positive commercial real estate environment, PwC and The Urban Land Institute said in their Emerging Trends in Real Estate report.
But real estate still has challenges ahead. “There are rising costs, pending tax reform and new infrastructure spending that could impact the labor market,” said Byron Carlock, PwC Partner and U.S. Real Estate Practice Leader. “There are also various social issues in which the industry can take a leading role in helping to solve. Some of those include affordable housing, ESG-focused city planning and neighborhood inclusiveness.”
Carlock said regulators, policymakers and business leaders must work together to establish standards “that guide responsible behavior in our new post-pandemic reality.”
The report said property markets that were once predictable will likely stay uncertain, but noted decision-making confidence has improved since this time last year. Three-quarters of respondents in the new survey said they feel confident making long-term strategic decisions compared to less than half in last year’s survey.
Property investment remains top of mind for institutional investors as risk remains low and rates stay attractive, the report said. And urban landscapes face 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 ESG requirements,” ULI and PwC said. “As businesses approach environmental, social and governance issues in the property sector, it will be imperative to take a holistic approach and create a strong overall strategy to help create sustainable advantage and value.”
ULI Senior Vice President Anita Kramer noted distinct optimism within the real estate industry for its 2022 prospects, “and there is undeniably a weight of capital available for investment,” she said. “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.”
Kramer said developers need a “new vision” for communities. “One in which we repurpose obsolete buildings, reduce carbon emissions and create more affordable housing,” she said.