Real estate confidence drops, ULI and PWC survey finds

Real estate business confidence and expectations of profitability have dropped to a low level, reflecting widespread industry concerns across an array of indicators for the business, political and real estate environments, according to the latest Emerging Trends in Real Estate survey by the Urban Land Institute (ULI) and PwC. Based on the views of around 900 real estate leaders from across Europe, the report found 91% concerned about inflation, closely followed by interest rate movements (89%) and European economic growth (88%). Political uncertainty at the global, regional and national levels are of high concern as well. In five years’ time, only 13% see inflation being a problem, while interest rates (73%) and growth (76%) remain medium term concerns. From a real estate business perspective, construction costs and availability of resources top the list, with 92% concerned about costs and 84% about resources in 2023. These issues are expected to remain for the longer term with 76% and 73% seeing respective cost and resource problems for the next three to five years. On the back of this uncertainty, 71% of real estate leaders believed Europe would move into recession before the end of 2022, negatively affecting development activity, availability of finance and investment volumes followed by occupancy, rents and values. Lisette van Doorn, ULI Europe CEO, said: “Since we conducted the survey and interviews over the summer, which already highlighted deep concerns, the industry has become even more worried. “But there is still a lot of capital available to invest and mostly not in a hurry, waiting for the right opportunities to arise. For the industry to weather the storm, stock selection is key, in addition to a strong ESG focus, operational skills and customer focus.” Gareth Lewis, ETRE leader, director at PwC, added: “Though the same cities remain in the top three, the overall investment and development prospects for all 30 cities have declined. London is first for the second successive year, followed by Paris and then Berlin, swapping places from last year. Cities that have risen in the rankings most significantly this year are Madrid, Lisbon and Copenhagen. “New energy infrastructure tops the sector rankings for the second year, reflecting historically high energy prices and a longer-term trend in which investors rebalance holdings towards alternative assets. The life sciences sector comes second and data centres are third.”

Real estate confidence drops, ULI and PWC survey finds

Based on the views of around 900 real estate leaders from across Europe, the report found 91% concerned about inflation, closely followed by interest rate movements (89%) and European economic growth (88%)

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