Watch These ‘Global Emerging Trends,’ Say ULI and PwC

Leading executives from the U.S., Europe and Asia discuss the newly released report.

Lisette van Doorn, CEO, ULI Europe. Image courtesy of ULI/PwC

The pandemic, climate change, and environmental, social and governance agendas will play major roles in the way real estate executives around the world make investment decisions, according to the Urban Land Institute and PwC.

ULI and PwC released the 2021 Global Emerging Trends in Real Estate report during a webinar Thursday featuring commercial real estate executives from the U.S., Europe and Asia.

The industry leaders discussed how the report focused heavily on the pandemic’s impact on the industry and the growing importance of an environmental, social and governance agenda for real estate companies.

Lisette van Doorn, CEO of ULI Europe, moderated the panel, which also featured an overview of the report by Gareth Lewis, PwC’s ETRE Global and EMEA leader. Mary Ludgin, senior managing director & director of global research at Heitman in Chicago; Olivier Elamine, CEO of Alstria Office REIT-AG in Germany; and Benett Theseira, managing director & head of Asia Pacific at PGIM Real Estate in Singapore, were the panelists.


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Gareth Lewis, ETRE Global & EMEA Leader, PwC. Image courtesy of ULI/PwC

The report, written by Doug Morrison and Mike Phillips, is based on interviews with senior property professionals from the ULI/PwC Emerging Trends in Real Estate reports for the U.S. and Canada, Europe and Asia Pacific. It also includes new interviews focused on investment and development trends across the globe as the industry begins to recover from COVID-19-related impacts, the outlook for real estate finance and capital markets, and the long-term influence of megatrends.

A significant portion of the report deals with how climate change and decarbonization strategies are a growing part of how commercial real estate companies are doing business.

More than a year after the COVID-19 crisis began, “the real estate industry is still getting to grips with the daunting twin challenge of a cyclical downturn juxtaposed with the long-term consequences from the disruption to the way people live and work,” Lewis noted. 

There are regional and sectoral differences in how the pandemic has impacted the industry. According to Theseira, Asia has been back to business for many months and a strong recovery is underway. Crediting vaccine rollouts, he said the recovery is “happening faster and a little earlier” than expected there.

Benett Theseira, Managing Director, Head of Asia Pacific, PGIM Real Estate. Image courtesy of ULI/PwC

Meanwhile, the question many in Germany are asking is: When can they “resume some sort of normality without going into lockdown overnight?” Elamine noted.

Industry leaders interviewed for the global outlook report were hopeful a consumer-led economic recovery would lead to an uptick for the second half of 2021—but also acknowledged much of that would depend on the level of vaccinations and easing of lockdown restrictions.


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One difference between the interviews for this report and those conducted for the regional Emerging Trends research last year is that many more expressed concerns about possible stock market bubbles and inflationary pressure in the U.S. and Europe.

A hedge against inflation

Despite those concerns, industry leaders “believe the inherent attraction of real estate income is even stronger this year than in pre-COVID-19 times,” the report noted.

Real estate remains an attractive investment even though yields have compressed. “There still is a healthy spread,” Ludgin said, adding that if the industry doesn’t overbuild, “real estate is a hedge against inflation.”

Asked whether there will be widespread distressed debt once government support packages end, the webinar panelists agreed with the report: If it occurs, it’s unlikely to match levels seen after the global financial crisis in 2009.

Mary Ludgin, Senior Managing Director & Director of Global Research, Heitman. Image courtesy of ULI/PwC

Elamine said actions taken by the Federal Reserve and other central banks have limited the amount of distress. He expressed some “disappointment,” noting his firm had been “ready to take advantage of that” but has not seen significant distress happening in Europe.


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The report also pointed to a “bifurcation in pricing” between popular sectors like logistics and those that have been hit hard by the pandemic, such as hospitality and parts of retail. PwC’s U.S. research notes there could be more financial distress ahead in the coming year, with the retail sector most at risk.

More than 8,000 brick-and-mortar stores closed in the U.S. in 2020, and PwC estimates that figure could rise to 25,000. U.K. research had similar findings, with more than 17,500 closures of retail, hospitality and leisure venues in 2020—and those figures are projected to soar this year.

Unsurprisingly, the future of the office sector is the one that is toughest to predict—particularly in the U.S. and Europe, where there has been greater reliance on remote working and most expect some kind of hybrid model when workers to return to offices after COVID-19.

In addition to logistics, housing is the sector that has also been in favor for its stable income. The report states industry players in the U.S. and Europe also see housing as “fulfilling a basic need in society and as such very much part of their ESG agenda.”

Push for decarbonization

A growing part of ESG is decarbonization, and the CRE industry has been focusing more on the issue in the past 12 to 18 months, the report noted. The growing focus “has been driven primarily by providers of finance and the biggest tenants, but also by climate change becoming more tangible in the form of more frequent extreme weather events.”

ULI Global CEO Ed Walter said in a prepared statement that the real estate industry recognizes the long-term impact of climate change will be greater than the economic impact of the pandemic.

Craig Hughes, global real estate leader at PwC, noted in prepared remarks that owners, occupiers and all other real estate stakeholders will have to work together if the industry is to play its role in reversing climate change and adapting to a post-pandemic world.

But this is a complex issue that has a “knowledge gap, moving targets and competing pressures.” Part of the problem is currently there are no common definitions of what net-zero means. Does it apply only to the carbon emissions related to the operation of the building or also the “embodied carbon” emitted during production and transport of materials and construction?

“Any certification or net-zero standard that does not put embodied carbon front and center of its thinking risks sending the real estate industry down the wrong path, stifling innovation in the areas where it is truly required, and diverting funding to initiatives that will not be that impactful in reducing carbon emissions,” the report stated.

While there is a need for the industry to focus on decarbonization, “we really need to be realistic around what we can and cannot do,” Elamine said, noting that CRE companies should avoid using this as a marketing tool.

Olivier Elamine, CEO, Alstria Office REIT-AG. Image courtesy of ULI/PwC

One way to have an “immediate impact on decarbonization,” he said, would be to stop building in sectors that tend to be overbuilt, such as offices, retail and entertainment, and focus on housing, schools and hospitals. His company, he said, is “making tons of money on retrofitting.”

The report also addressed retrofitting, noting a change in valuation methodology would take account of retrofitting costs and force change by modifying industry best practices and requiring changes from regulatory boards that govern how valuations and appraisals work in different companies. It advised that developers, owners, suppliers, advisers, customers, local and national governments and international bodies should collaborate on common goals and strategies. Green leases can be used to incentivize tenants to switch to renewable energy sources and reduce their own energy consumption.

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