As the next real estate cycle begins, global real estate leaders are relatively optimistic, according to the Urban Land Institute/PwC’s “Emerging Trends in Real Estate: Global Outlook.” One U.S. investment banker noted that transaction volumes are anticipated to increase, with hospitality, retail and office leading the way.
On the other hand, the report, which shared the opinions of global real estate leaders, highlighted various concerns. Political risk was a major problem for many who were interviewed.
“The backdrop to the latest interviews included martial law being declared in South Korea in the final weeks of 2024, the slew of executive orders in the early days of the new U.S. administration and political tensions created in the build-up to the election in Germany in February,” the report commented. As such, the industry is on alert, wondering how political decisions and the wars in Ukraine and Gaza will impact economic growth and monetary policy.
Other issues included:
The office sector: Uncertainty. While in some places there is recovery, office “still prompts a wide divergence of opinion on the prognosis for non-prime premises in the U.S. and Europe, if not in Asia Pacific where hybrid working is far less of an issue,” the report noted.
Residential: Better consensus. The report noted that there tends to be more agreement that residential could be considered “a strong sector play,” especially with senior and student housing anticipated to be among the top sellers in 2025. There also continues to be a widespread supply/demand imbalance.
Infrastructure real estate: Potential outsized returns. Those interviewed for the report noted that the greatest opportunities involve assets “at the intersection of real estate and infrastructure.” In other words, it includes logistics facilities, data centers, and energy infrastructure. The report cautioned that investors need to move beyond typical real estate metrics to consider “digitization, the exponential growth of artificial intelligence and power requirements, and increasing focus on strategic regional independence, including energy security and data sovereignty.”
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