Real estate is increasingly prominent in global investment strategies, demonstrating resilience amid pandemic uncertainty. Investors are racing to deploy capital into core assets like offices and residential in major cities. New regulations on ESG shape decision-making. Key trends include targeting net zero buildings, competing for core assets driving prices up, construction constraints limiting new supply.
Investing in sustainability is now a priority
ESG factors now shape real estate investment. Three quarters of investors globally are assessing holdings on environmental criteria or taking action to dispose of non-confirming assets. There is increasing intent to invest in net zero or other sustainability certified buildings as investors future-proof portfolios. However, currently less than 1% of office space globally meets these standards presenting big opportunities.
Intense competition for core assets in top tier cities
Investors strongly prefer prime office and residential in London, New York, Paris and other major cities. However supply of core assets is very limited. This drives fierce competition from investors, pushing prices up over 10% in 2022. Owners of secondary properties will likely sell at discounts before values drop further. The competition may diminish activity short-term but markets expected to reconcile on pricing.
Construction constraints impact values and development
Limited materials and labor apply upside and downside pressure. In the short term it delays new construction. But it also restricts occupier space options, strengthening prices of existing core assets. This motivates joint ventures and M&A to create new core assets. It also accelerates modular and sustainable construction methods.
In 2022 real estate remains a strong option despite uncertainty and constraints. Investors target sustainability and urban prime assets pushing prices up further. Competition is high but construction challenges limit new supply underpinning values.