March 18, 2024
Last week, ULI & PwC published the 2024 Global edition of Emerging Trends in Real Estate. To launch the report, a highly energised expert panel discussion was held during MIPIM to debate many of the report’s key findings. The panel included Julia Simet, co-CEO of Gensler; Lisette van Doorn, CEO of ULI Europe; Struan Robertson, Chairman of Real Estate Gaming & Lodging EMEA Bank of America Merrill Lynch; Megan Walters, Global Head of Research PIMCO Prime Real Estate; and was moderated by Carol Hodgson, Executive Director, Head of Research JP Morgan Asset Management.
Megan Walters began the discussion by exploring how investment strategies are evolving, identifying significant opportunity in upgrading and repurposing the built environment to make it more functionally fit for purpose and meet increasingly stricter environmental requirements. She added that a focus on placemaking, including those places between buildings, will ensure that real estate companies can provide the real assets that cities need to thrive and survive.
Touching on the workforce and the ‘hot’ topic of the future of offices, the panel discussed how there will be a smaller workforce with Gen Z, resulting in an increasingly fierce war for talent. Carol Hodgson tabled whether hybrid working is here to stay, and “change is permanent” was a response from the panel, concluding that the current mixture of remote and in office work will stick. While large organisations are encouraging implementation back into the office, realistically this isn’t possible, and it risks closing the talent pool for diversity.
Lisette van Doorn argued that while the overall volume of office space may reduce, trends indicate that the amount of office space per person may increase. The office is about being together, attending events and in person meeting, which are all important avenues for employees to share knowledge and ideas, and this extends beyond offices to cities in general and to other asset classes.
The panel noted that we need to think about space in a different way, and choice should be a high priority. This impacts factors including quality and cultural issues, and performance benefits.
Transformation across all real estate classes is required, and we need to understand that the traditional skill bases many of us have learned are no longer aligned to these transformational forces. Value is placed on other factors that will drive progress forward – that is what we mean by the great reset. For example, this could involve a greater need for an operational real estate skillset akin to that of the hospitality sector. The great reset also expands into finance: if capital flows are changing, do we know how to price/finance them? Dynamic prices of offices, hotels and other uses should be considered.
The conversation then moved onto geopolitics, with this year being dubbed the ‘year of elections’, with over 60 jurisdictions around the world going to the polls in 2024, which is all weighing on industry sentiment. Inevitably, the discussion then focused on Donald Trump, questioning whether we are ready for the unpredictable moves that will have the potential to impact every market in every possible way.
ESG provided the next focus, where many challenging questions were raised:
During the debate, Lisette van Doorn shared her ambitions concerning decarbonisation and ULI’s C Change programme, which aims to accelerate the decarbonisation of the real estate sector through targeted intervention points such as transition risk assessment guidelines.
Lisette also noted that not everything that is built and has a positive impact on the environment has necessarily been modelled in a spreadsheet and provided the example of Phillips in the Netherlands.
She concluded that as an industry we must come together, to drive positive change in this arena.
Carol Hodgson brought the discussion to a close by asking the panel for their outlooks for the next few years and the opportunities that lay ahead.
Struan Robertson noted that equity in assets do not have maturity, which will mean they are unlikely to have a faster recovery period.
Julia Simet observed that global companies are struggling to make longer term decisions concerning asset management and headcounts which will impact the industry.
Megan Walters then outlined six key factors we need to keep a close eye on: AI, cyber-attacks, societal politics, the cost of living, economic downturn, and extreme weather events.
It was noted that the opportunities ahead will include Critical Facilities, R&D opportunities, and the evolution and reuse of existing buildings.
We also need to prioritise business with the next generation, teaching new skills and building new organisations, which isn’t something that can be achieved by AI.
Finally, it was tabled that our focus needs to be centred around people, as they are – and should be – the fabric of our cities.
The panel session wrapped up with a discussion on mixed-use and urban place making.
Ultimately real estate and urban development is about making places and buildings for people. Therefore, ensuring that the ‘S’ component of ESG is front and centre will be integral for the real estate sector in the years to come.
As one interviewee in this year’s report commented “We are very much in an era of real estate trying to solve social challenges.” This is leading many investors and developers in the sector to focus on reshaping societal norms and encouraging a renewed focus on community and environmental care.
Join us for further debate on the 2024 Emerging Trends in Real Estate® Global Outlook on Wednesday 20 March, 2024 when two webinars will be held featuring expert panels discussing the global challenges and opportunities facing real estate.