While PwC U.S. and the Urban Land Institute’s “Emerging Trends in Real Estate Report 2022” reveals a robust real estate market driven by a booming economy, there is concern regarding a lack of affordable housing and the impact of climate change and inflation.
In the 111-page report, researchers concluded that how, why and where people shop is forever changed, and still evolving. The research was culled from surveying nearly 1,700 real estate industry experts, and explores “how the property sector has seen encouraging and unprecedented recovery from the COVID-19 pandemic,” PwC said in a statement.
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“The report highlights that flexibility, convenience and ultimately real estate’s resilience, can drive property sector function over the next decade,” PwC noted. “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 health care spaces.”
PwC and the ULI said real estate property markets, which were previously predictable, “will likely remain in a bubble of uncertainty.” However, the survey found that decision-making confidence has improved compared to last year’s report. “Three-quarters of respondents in the 2022 survey report felt confident making those same long-term strategic decisions compared to less than half in the 2021 survey,” PwC and ULI said in the statement. Those decisions will likely include more bullish real estate investments.
“Property investment is top-of-mind for institutional investors in both traditional and alternative sectors as risk remains low and rates stay attractive,” the authors of the report said. “Urban landscapes are facing change, as new land uses and updated zoning allows markets to evolve.”
The research found that these market conditions “remain under the cloud of climate urgency, prompting new ways of standardizing and measuring ESG requirements.” PwC and ULI 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.”
“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,” said 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.”
Kramer said emerging from this is “the opportunity to lay the foundation for a new vision for our communities, one in which we repurpose obsolete buildings, reduce carbon emissions, and create more affordable housing.”
Byron Carlock, PwC partner and U.S. real estate practice leader, said an “abundance of investable capital, low-interest rates and continued demand for many product types has created a positive environment for our industry.”
“However, not everything is rosy, and real estate still has its challenges ahead,” Carlock said. “There are rising costs, pending tax reform, and new infrastructure spending that could impact the labor market. There are also various social issues, 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.”
“Retailers will need to continue to adapt to meet consumers where they want to be,” the report stated. “The major chains are investing heavily to upgrade all aspects of their e-commerce infrastructure, from the way products are merchandised on their websites to how items are delivered to customers.”
The report noted that shopping centers need to keep evolving. “Temporary outdoor dining will become a permanent feature,” the report said. “And people are going to continue picking up groceries and other items they purchase online, so retail centers need to provide more space for pickup.”
The researchers concluded that “retail will never be the same again.”