Emerging Trends in Real Estate®

The Global Outlook 2018

Maintaining balance

Real estate continues to attract capital, demonstrating its stability and appeal over other asset classes in an otherwise uncertain investment world.

However, reading across the three recently published Emerging Trends in Real Estate reports, an undercurrent of caution exists. Influenced by a gradual reversal of monetary policy, late-cycle property market and a fundamentally different demand environment.

Many of those interviewed believe that the sector is at a crucial point in its evolution with those unwilling or unable to embrace change risk being left behind permanently. And those canvased for Global Emerging Trends in Real Estate 2018 cite the sharply increased competition they currently face as record amounts of capital move into the real estate sector. One common theme to the regional reports and the new interviews is the clear trend towards increased capex costs as owner-operators seek to keep their real estate relevant to occupiers – whether that’s retail, office, logistics or residential.

All interviewees for Global Emerging Trends in Real Estate 2018 agree, these are challenging times for an industry that must somehow strike the right balance between risk management, innovation and entrepreneurship.

With real estate late in the cycle, investors and owners will need to utilise any means necessary to improve the performance of assets. To raise and make money in an increasingly crowded field will require more sophistication and companies that can use technology to give themselves even the smallest edge will thrive.

 

Top cities for real estate investment in 2018

Canada Europe
Asia Pacific United States
Vancouver Berlin Bangalore Seattle
Toronto Copenhagen Bangkok Austin
Montreal Frankfurt Guangzhou Salt Lake City
  Munich Ho Chi Minh City Raleigh/Durham
  Madrid Jakarta Dallas/Fort Worth
  Hamburg Manila Fort Lauderdale
  Dublin Mumbai Los Angeles
  Stockholm Shanghai San Jose
  Luxembourg Shenzhen Nashville
  Amsterdam Sydney Boston

How concerned are you about the following business threats to your organisation's growth prospects?

  Real estate (30) Global (1,293)
Cyber threats 17% 40%
Speed of technological change 10% 38%
Changing consumer behaviour 7% 26%
New market entrants 7% 20%

Source: PwC Global CEO Survey 2018

People matter

One of the biggest challenges for real estate is technology driven disruption. But it is notable that the recent PwC CEO Survey showed that real estate executives are less concerned with changing the way they run their businesses in the face of disruptions of all kinds, such as cyber threats and technological change, compared to global CEOs in other industries. Only 10% are worried about speed of technology change compared to a 38% global average.

And a key building block of any strategy to adapt to disruption is to hire people with the right skill sets. Similarly concerning is the fact that just 43% of real estate CEOs were rethinking their human resource function, compared to a global average of 60%. A sentiment that was reflected by interviewees of this Global Emerging Trends in Real Estate report.

 

Proptech and the disruptive technologies most exercising real estate

Can an industry that has for so long operated under the comfort blanket of access to scarce resource thrive in a new world of shared access and digital connectivity?

Big data, boosted by AI and blockchain applications are developments that real estate knows will have big implications, but currently finds somewhat difficult to get its head around.

Lines between traditional real estate companies and new entrants mainly from the technology/services field are becoming blurred. Better access to data - the new ‘oil’ for the real estate sector - could allow technology companies or new entrants to dominate entire sections of real estate.

There is an opportunity for new entrants to disrupt the sector and steal value and market share. But ambitious, innovative, established real estate business arguably start from an advantageous position. These are interesting and exciting times, and our Global Emerging Trends in Real Estate 2018 interviews paint a picture of an increasingly competitive battlefield, between traditional real estate investors and new entrants, to capture future value from the world's pre-eminent asset class.

Tech into real estate

Company name: Investment/collaboration with: Business product/service:
Fifthwall LimeBike1 Shared bike - smart mobility. First/last-mile transportation. Expand accessibility to buildings. Seen as a way to make properties more valuable.
Fifthwall Industrious1 Partners with managers to provide co-working space/workplace services
Facebook Real estate2 Plans to create mixed-use campus town
Softbank WeWork (co-working), Katerra (modular housing)2 Tech fund invests in 'real estate' business
Airbnb Newguard2 Enables long-term tenants to sublease apartments
Google Real estate2 Development of city region in Toronto
Amazon Wholefoods2 Acquisition opens up access to physical retail/distribution

1 Services

2 Co-working/Co-living

Source: PwC Research

Contact us

Gareth Lewis
Emerging Trends in Real Estate Project Leader, PwC United Kingdom
Tel: +44 (0) 207 804 5537
Email

Follow us