Price Waters Cooper Releases the Emerging Trends in Real Estate Annual Report...
Annual ULI, PwC report finds certain pandemic-related structural changes can endure while property markets are ‘normalizing’
Over 2,000 industry experts share insights on the most significant factors impacting the real estate industry
WASHINGTON (October 27, 2022) – The Urban Land Institute (ULI) and PwC US today released Emerging Trends in Real Estate® 2023, an annual report highlighting the trends shaping the real estate industry. In its 44th edition, the report includes proprietary data and insights from more than 2,000 leading real estate industry experts, exploring shifts in the property sector since the pandemic, changing investor sentiment toward climate risks, the emergence of impact investing, and other real estate issues within the United States and Canada.
Insights from the report reconfirm two bifurcated market trends: aspects of the real estate industry are “normalizing” and reverting to pre-covid patterns while others have permanently shifted to the “new normal” that was adopted with the pandemic.
"As we enter 2023, the pandemic-driven factors that upended the global economy for more than two years are starting to fade," said Anita Kramer, senior vice president of ULI's Center for Real Estate Economics and Capital Markets. "At the same time, structural changes like the widespread adoption of remote work will likely continue to inform investor behavior. A series of long-term factors such as the rising cost of housing, increased climate risk, and declining socioeconomic mobility pose continued uncertainty for the private and public sectors alike. There are also opportunities – the increase in federal infrastructure spending provides the chance to create greener and more equitable communities that can adapt to these challenges."
The report also highlights the real estate industry’s move to look beyond cyclical headwinds and focus on a long-term approach to real estate assets. In an environment with rising interest rates, declining GDP, and minimized deal activity, the industry is opting to ride out the slump and position itself for sustained growth and strong returns.
“The past few years have been historic territory for the real estate industry, and the pandemic has permanently changed how and where we use different types of properties,” said Byron Carlock, US real estate leader for PwC. “There are several factors at play determining both the near and long-term future of the industry. Although real estate capital markets are constricting, they are still open for business, investors are still buying high-quality properties, lenders will continue to lend, and companies should move forward with cautious optimism through this current cycle and prepare to adapt to quick market changes. The industry should also work closely with stakeholders to help assess they are addressing demands and shifting sentiments while building trust.”
Additional key insights from the report include:
The market is normalizing
Marked by the cooling of the housing market, the industry is continuing to sell, just not at the record pace experienced in 2021 and the first half of 2022. The U.S. commercial property market had an incredible run, with some of the strongest returns, rent growth, and price appreciation rates ever recorded. The industrial sector is seeing similar changes; however, it still has record-low vacancy rates, which can be attributed to the demand for high-quality, well-located logistics facilities that can keep up with the demand of the supply chain. Other markets within real estate are trending back up to their pre-pandemic normal, including the hotel sector and property investments.