Research by ULI and PwC finds nearly half of Europe’s real estate leaders concerned about buildings becoming obsolete in the next five years in the face of long-term upheavals in demographics, climate change, technology and lifestyles.

Emerging Trends in Real Estate® Europe 2023, the 20th annual survey by the Urban Land Institute (ULI) and PwC of European real estate sector leaders’ expectations for the year ahead, concludes that Europe’s real estate faces a major challenge to be fit for purpose.

Most of the 900+ industry leaders that participated are making long-term resources available to address the fit-for-purpose agenda. However, the challenging business environment has reshuffled priorities to financing and high construction costs, and scarcity of resources has made real estate renewal more expensive to achieve, consequently delaying much needed investment.

The industry is uncertain about when obsolescence will start to show in values. Interviewees acknowledge the failure of valuations to reflect sustainability-related capex requirements, even though 81% of survey respondents believe ESG credentials will have a material effect on asset valuations over the next 12-18 months.

Industry leaders identified the ESG agenda (54%) and climate change (42%) as the two top factors driving change in real estate over the next 20 years. Fifth at 29% was the related factor of decarbonisation. Changing customer demands (35%) and technological innovation (34%) were also significant factors.

Repurposing existing stock from one sector to another is on an upward trend. More than three-quarters of respondents expect to be repurposing still more assets in five years’ time. Office to residential is expected to be the most common repurposing in the next 5 years, followed by retail to mixed use (45%) and office to mixed use (38%).

ULI Europe CEO, Lisette van Doorn, said, “The industry is in a tough position with high inflation and construction costs, and occupiers facing rising occupancy costs from high energy prices. This heavily impacts rent affordability. At the time of rent renewal, many will critically review the options to reduce occupancy costs by moving to a sustainable building, which also helps them attract and retain talent. We therefore, expect environmental sustainability to become a ‘must have’ for sound operational performance.”

“In addition, the 20-year view suggests a big shift away from single-use real estate and a blurring of the boundaries between sectors. Keeping our buildings ‘fit-for-purpose’ is vital if we want resilience and the flexibility to meet rapidly changing occupier demands and use our spaces and cities more efficiently.”

ENDS

About the Urban Land Institute

• The Urban Land Institute is a non-profit education and research institute supported by its members. Its mission is to shape the future of the built environment for transformative impact in communities worldwide. Established in 1936, the institute has over 46,000 members worldwide representing all aspects of land use and development disciplines.
• ULI’s mission priorities that the organisation will be focusing on over the next three years include:
  • decarbonising the real estate sector and targeting net zero;
  • educating the next generation of diverse real estate leaders; and,
  • increasing housing attainability in communities around the world.
• ULI has almost 5,000 members in Europe across 15 National Council country networks. For more information, please visit europe.uli.org, or follow us on Twitter, LinkedIn or Instagram.

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with over 276,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.