Worldwide uncertainty following the Russian invasion of Ukraine, the impact of surging global inflation, and exacerbating climate change are weighing on real estate leaders’ minds. The Urban Institute and PwC released the 2022 Global Emerging Trends in Real Estate report based on nearly 30 interviews with international real estate experts and investors to identify the top-of-mind issues they believe could greatly impact the real estate profession.
Despite global unrest, industry leaders agreed that real estate remains an attractive option for investors, especially to serve as protection against inflation.
Here are a few highlights from the report that could prove wild cards for real estate over the next year:
Inflationary pressure: In January, inflation in Europe reached 5.1% and in the U.S. 7.5%, which is the fastest annual rise in 40 years. “The full impact on real estate of labor shortages, rising wages, and food bills and surging energy costs remains unclear,” the report says. Russia’s invasion of Ukraine also has heightened fears over supply chains, energy prices, and the risk of even higher inflation.
Worldwide uncertainty from Russia’s invasion of Ukraine: As concerns increase about an escalation of the conflict in Europe, widespread uncertainty has been felt across global markets. “The Ukraine crisis has rapidly emerged as a fresh risk to global economic growth,” the report says. A consensus among economists is that the Russian invasion of Ukraine is expected to be a far greater geopolitical risk than slower global growth and higher and longer-lasting inflation.
Exacerbating climate change: Real estate leaders sounded greater urgency around environmental, social, and governance issues. “Climate change is clearly far more front and center on a global agenda than it had been and it’s becoming actionable. That’s the key,” one U.S.-based investment manager said in the report. Two-thirds of the U.S. office stock is located in cities that already have some form of 2030 net carbon target and a tax or consequence if owners fail to meet it, according to the report.