By Kingsley Adegboye with Agency report
As confidence returns to real estate, the industry faces a number of fundamental shifts that will shape its future.
We have looked into the likely changes in the real estate landscape over the coming years and identified the key trends which, we believe, will have profound implications for real estate investment and development.
PriceWaterHouseCooper PWC, has noted that looking forward to 2020 and beyond, the real estate investment industry will find itself at the centre of rapid economic and social change, which is transforming the built environment.
According to a report by PWC, while most of these trends are already evident, there is a natural tendency to underestimate their implications over the next six years and beyond.
“By 2020, real estate managers will have a broader range of opportunities, with greater risks and new value drivers. As real estate is a business with long development cycles, as from planning to construction takes several years, now is the time to plan for these changes.
“Already, thousands of people migrate from country to city across Asia, the Middle East, Latin America and Africa on a daily basis, attracted by the new wealth of these economies. By 2020, this migration will be firmly established. The cities will swell, and some entirely new ones will spring up.
“Meanwhile, the growing emerging markets’ middle class and ageing global population are increasing demand for specific types of real estate. Sub-sectors such as agriculture, education, healthcare and retirement will be far bigger by 2020.
“High energy prices, climate change and government regulation are already pushing sustainability up the real estate agenda, but by 2020, their impact will be far greater.
Technology is already disrupting real estate economics, but by 2020, it will have reshaped entire sectors. And the real estate community will have taken a greater role in the financial ecosystem, in part moving into the space left by banks”.
Pointing out that its fictional forum illustrates some elements of this change, PWC said “We believe the new era of real estate investment, to 2020 and beyond, is the beginning of a time of unprecedented opportunity for real estate investors and asset managers, although with greater risk.
“The global stock of institutional-grade real estate will expand by more than 55 per cent from US$29.0 trillion in 2012, to US$45.3 trillion in 2020, according to our calculations. It may then grow further to US$69.0 trillion in 2030.
This huge expansion in investable real estate will be greatest in the emerging economies, where economic development will lead to better tenant quality and, in some countries, clearer property rights.
“And it will play out across housing, commercial real estate and infrastructure. Indeed, as intense competition continues to compress investment yields for core real estate, real estate managers will have every incentive to search for higher yields elsewhere”.