Emerging Trends in Real Estate®

The global outlook for 2023

The underlying narrative around real estate in 2023 is one of caution, although there is some hope for stability and renewed investment activity later in the year following the uncertainty of high inflation and rising interest rates over the past 12 months.

This report is based on interviews with senior property investment professionals and regional surveys conducted jointly by PwC and the Urban Land Institute in Europe, United States and Canada, and Asia Pacific, and is a key indicator of sentiments on global real estate.

Managing Expectations

Senior property professionals interviewed for this Global edition of Emerging Trends in Real Estate® draw comfort from signs of an improving macro and monetary policy backdrop to capital markets. They are working on the basis that inflation and base rates will peak in 2023.

But they also acknowledge that the market will still be dealing with an elevated interest rate environment compared with the zero-percent years after the Global Financial Crisis (GFC). The familiar tailwinds of plentiful liquidity, loose monetary policy and cap-rate compression appear to be over.

As many interviewees suggest, real estate must work much harder for its returns, its favoured position ahead of other asset classes no longer quite so assured.

"The risk remains but the current consensus is that any recession in the US and Europe would be shallow and shorter than initially feared, lifting business confidence in the process"

Global Investment Manager

There remain major challenges and assumptions around what most interviewees expect will be a “U-shaped” economic recovery and a similarly drawn-out response in real estate capital markets, with the biggest obstacle to getting investment deals done this year probably being the uncertainty over where and when values will settle. 

As this gradual recovery unfolds and as companies deal with higher costs and lower revenues, some will put expansion plans on hold and occupier markets will take time to pick up speed.

Top cities for real estate investment in 2023



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Tampa/ St Petersburg








Ho Chi Minh City










Key trends

Making offices fit for purpose

More than three years on from the onset of the COVID-19 pandemic, great uncertainty remains as to how much companies and their employees will use office buildings in the future.

Though the office sector is likely to remain a mainstay for most institutional investors, there is no consensus around where occupier demand in a hybrid working world will settle. But there is a strong sense that the sector will experience something of the same disruption as retail albeit through different structural drivers. One global investor speaks for many in declaring: “Office is the new retail.”

Leading logistics

Logistics has long been one of the main real estate beneficiaries of technology but the sector’s growth is also rooted in basic supply/demand dynamics, which is why occupancy levels are at or near record levels in North America, Europe and Asia Pacific.

For years there have also been concerns raised in Emerging Trends about cap rate compression in logistics, and so there was some irony in the correction that started late last year in Western markets when tenant demand was so strong. In Asia Pacific, one interviewee points out, it was more of “a pause in the aggressive growth of pricing” than a correction.

Yet the sector seems to be emerging from the current market uneasiness stronger than ever, with the supporters once again far out-numbering the sceptics. Inevitably the re-pricing in some markets has already reinforced the sector’s short-term appeal. But most interviewees believe logistics remains a structural growth story, and that it is based on much more than e-commerce.

Retail revival?

It would be easy to dismiss the prospects for retail property in 2023, given the pressure on consumer spending in the prevailing economic climate. But the sector is showing encouraging signs of life.

Investment managers interviewed for this Global edition note strong operational performance in their retail portfolios in the US and Europe, and not just in the relatively resilient sub-sectors like convenience, grocery and retail parks. Selected shopping centres are also trading well.

Chapter Two: Carbon Pricing

In a juxtaposition of the short and long-term challenges to real estate, the environmental, social and governance (ESG) agenda has become the unifying thread that links everyone, regardless of sector.  Even so, the industry has a long way to go, as Emerging Trends in Real Estate®  Global sets out with a detailed analysis of the limited progress to date of one of the most important tools to be used in the decarbonisation of real estate: carbon pricing. 

Although it is perhaps still too early in its development to conclusively assess the extent of its effectiveness, carbon pricing does have the potential to change the way companies think and act when measuring and reducing emissions from their portfolios.  

The current problem with the system is that in many cases it is being applied voluntarily, and the carbon prices being applied are not high enough to push companies to decarbonise. With a few exceptions, carbon taxes being applied by governments are too low to force change. The carbon prices that companies are setting on themselves are usually higher, in many cases at or near the level academics and international bodies believe will help the world meet the Paris Agreement target of limiting global warming to 1.5 degrees Celsius. 

But the fact that carbon pricing is so unevenly adopted and applied means that its efficacy is reduced. More realistic pricing, from companies and regulators, and a wider adoption is required if carbon pricing is to live up to its potential.

“While it is noble and helpful for individual companies to set an internal carbon price, it's very hard to be really effective across the industry if it's just a company-by-company approach.”

Global Investment Manager
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