YOU ARE HERECONTENTSCONTENTSWELCOMEEXECUTIVE
SUMMARY

CHAPTER 1

BUSINESSENVIRONMENT

CHAPTER 2

ENVIRONMENTAL& SOCIAL IMPACT

CHAPTER 3

REAL ESTATE &CAPITAL MARKETSCHAPTER 4

SECTORSTO WATCH

CHAPTER 7
CHAPTER 5

CHAPTER 6

CITIESTO WATCH

20 YEARSOF EMERGING
TRENDS EUROPE

APPENDIXCITYPROSPECTS

ABOUT
THE REPORTYOU ARE HEREEXECUTIVE SUMMARYEXECUTIVE
SUMMARY“We are on the cusp of quite a significant
slowdown, both in the real economy andin the underlying real estate markets.”
Pan-European investment manager

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YOU ARE HEREEXECUTIVE SUMMARY

The outbreak of war in Ukraine
has cast a long shadow over
Europe, and real estate, like every
other industry, will have to deal
with the economic and politicalfallout for the foreseeable future.
While the industry leaders canvassed forthis 20th edition of Emerging Trends in Real
Estate® Europe report little direct impact
on their property portfolios from Russia’s
invasion of Ukraine, the war’s consequences
are seen in surging energy costs, historicallyhigh inflation and, latterly, rising interest
rates. Seven out of 10 survey respondents
believe Europe will move into recession
before the end of 2022.
The survey and the interviews wereconducted in the summer and, if anything,
the prospects for the European economy
and real estate markets have become evenmore uncertain in the months leading up to
publication.
The mood is in stark contrast to last year’s
report when there was still a COVID-inspired
solidarity among European countries aswell as a coming-out-of-lockdown peak inbusiness sentiment. Europe now appears far
more unsettled by the pressures of energy
supply and internal politics, which is adding
to the overall uncertainty for investors.

Much depends on the severity andduration of the expected recession, andas interviewees point out, the economic
circumstances and market conditions behindprevious downturns are all quite different
from what Europe is experiencing today.
Though the city rankings have a familiar
look — London retains the top spot while
Paris takes over second place from Berlin— the overall investment and development
prospects for all 30 cities covered byEmerging Trends Europe have declined sincelast year’s survey.
Even investors’ other customary safe havensin Germany, Frankfurt, Munich and Hamburg,
do not enjoy the same unwavering positive
sentiment as previous years, reflecting thepotential impact of inflation on Europe’s
largest economy and its dependency on
Russian gas supplies.
Despite the prevailing uncertainty, leasing
activity across Europe held up reasonably
well for much of 2022. But there is a
widespread belief that high energy prices
and a recession will lead to occupancies
and rents falling, even in previously robust
sectors. It is clear that 2023 will be a toughyear in any event, and as some industry
leaders contend, a recovery may not emerge
until early 2024.

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Unsurprisingly, confidence in the availabilityof equity and debt over the coming year
has sunk to its lowest level since theglobal financial crisis although it is unlikelythat liquidity will disappear altogether.
Development activity slowed in 2022 andis expected to fall sharply in 2023.
As a sign of the times, new energy
infrastructure tops the sector rankingsfor the second successive year, partly
reflecting historically high energy prices
and the prospect of shortages over winter.
This sector covers a wide range of real
assets, such as solar, wind, energy storageand electric transport infrastructure. Its top
ranking is also part of a wider, longer-term
trend in which investors rebalance holdings
away from mainstream real estate towards
alternative sectors that will benefit fromthe megatrends of demographics, climatechange and technology — and stronger, noncyclical demand.
It is notable that various forms of housing
dominate the top 10 picks from survey
respondents — as they have done forseveral years — despite increased concerns
over political risk in this sector. On a broad
level, there is an acceptance that the balance
between residential supply and demand inEuropean markets has not changed in thepast year, and it is unlikely to change any
time soon.

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The big fear is over the pressure on real estatevalues, which has been well signalled in thelisted sector as discounts to net asset value
continue to deepen. Direct property values
started falling in 2022 and a further decline is
now regarded as inevitable, with the pricing
between prime and secondary real estate
expected to widen.
Some of that concern has led to logistics, theone-time star performer, slipping down theoverall rankings although it still stands at seventh
place in terms of prospects for investment, andsixth for rental growth. But a sector that has seenyields compress to historic lows, sub-3 percent
in many markets, is particularly exposed whenvalues fall.
Many senior property professionals believe that
inflation will peak at some point in 2023 andbring clarity over how much central banks arelikely to raise interest rates. Assets might beworth less at that point, but there would be more
direction over where values are likely to settle.
Yet in dealing with the immediate disruption tomarkets the industry appears to acknowledge
that it must continue to evolve and respond
responsibly to the long-term structural changes
to real estate and the wider challenges aroundenvironmental, social and governance issues.

The challenge is always aligning actions withsuch laudable ambitions, and even more so in ayear when issues around energy efficiency andsupply have affected every European household
and when economic constraints threaten to
obstruct the path to net zero. Real estate’s efforts
here have a renewed criticality.
Nonetheless, as each year goes by, property
professionals are thinking much more about how
the industry conducts business and about thesort of real estate that will be “fit for purpose”
for the long term. To mark 20 years of Emerging
Trends Europe we have asked a broad range
of industry players to explore such themes andhow they may define real estate over the next
20 years while reflecting on the many market
changes that have shaped the industry to date.
As set out in Chapter 7, the industry’s movetowards a form of “responsible capitalism” overthe next 20 years is driven by many factors but
above all by the climate crisis. It is one trend thathas only gained in prominence and relevancethroughout Emerging Trends Europe’s history,
connecting the past, present and future.

Globalisation was a tremendous wealth creator in the world,
and it is going into a pause or a slight reverse. The implication
for real estate is that it's no longer the rising tide that sails
all boats. It's going to be about where you can differentiate
through being smart rather than just through scale.

Nearly 90 percent of respondents highlight theimportance of creating social impact alongside
financial return over the next 20 years, while 60
percent identify the importance of increasing
diversity in their organisations.

Global investment manager

LONDON, UK

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BUSINESS ENVIRONMENT

CHAPTER 1

BUSINESSENVIRONMENT“As investors, we are facing not only purely
economic issues but also geopolitical ones
that used to be interesting to understand but
are actually now having a significant impact
on our economies.”
Head of strategy, private equity firm

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If the third year of the pandemic
was supposed to usher in signs ofhope, the outbreak of war in Europe
has delayed recovery and exposed
significant structural weaknesses
in the economic, social andpolitical fabric.

The European Commission will undoubtedly facea tougher ride in achieving unanimous decisions.

Emerging Trends in Real Estate Europe
2023 finds the property world stalling at an
uncomfortable crossroads, as rising interest rates
hitched to soaring inflation drag Europe towards
recession.

While those interviewed for Emerging Trends
Europe report little direct impact on their property
portfolios from the Ukraine conflict, the war’s
consequences are everywhere. “It’s impossible
to say we haven’t been affected by the war. Just
look at energy costs, inflation and interest rates,”notes the CEO of a pan-European developer.

Summing up the mood across the industry, one
Irish property leader says: “Europe is in for a very
grim winter.”Following a brief, COVID-inspired, show ofsolidarity, Europe has become more unsettled
by the pressures of energy supply and internal
politics. States are even chiding each other for
their economic short-sightedness over theirreliance on Russian gas and have repeatedly
failed to reach a consensus on the issue.

There will be a change invaluations driven by higher
interest rates and a change
in relative pricing between
prime and secondary realestate, as soon asrecession comes.

A global head of investment management notesthat the differences are at times, stark: “If you’resitting in Germany or the UK, all of a sudden
energy is a huge subject, whereas the French,
benefiting from nuclear power, might be asking,where’s the problem?”But right-wing election successes in Sweden
and Italy, a new Prime Minister of the UK anduncertainty in France all suggest that further
upheaval is likely across the political landscape.

Says one German CEO: “Just look at sleepy andcomplacent Germany. I believe the heat we are
feeling now is actually triggering some neededreforms that we couldn’t have gotten a grip on
without those external forces.”

The resultant affordability crisis and recession
risk — the effects of which are likely to impact
all sectors in one way or another — have robbed
the industry of the clear “safe-haven” sectors
afforded by the first two years of COVID-19,
such as residential and logistics. In the faceof increasingly expensive debt, property
professionals perceive that even the relative
income security offered by operational assets
is going to require greater effort and ingenuity.
Many are waiting for clarity on pricing and yields.
"There will be a change in valuations driven byhigher interest rates and a change in relative
pricing between prime and secondary realestate,” suggests the head of investment strategy
of a pan-European investor.

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The listed sector is already bearing the brunt
as discounts to net asset value (NAV) continue
to deepen, with a number of firms exploring the“take private” route. Italy’s Coima is a recent
example, delisting after just six years on thestock market. But the pressure is not limited tofirms specialising in assets unduly affected by
the current crisis – even the managing directorof a profitable logistics group notes that “likeeveryone, our share price has dropped fairly
significantly”.
Investors do not like uncertainty. While many took
an early summer break in the hope of resuming
business as usual in September, the investment
climate has continued to deteriorate significantly.
Now, many transactions are on hold as fears
have crystalised into clarity with borrowing costs
higher than they have been in a generation.
Although real estate companies are not asleveraged as they were going into the global
financial crisis largely due to the regulatorychanges of the past decade and a half, doubledigit inflation in some territories — and thespectre of stagflation — continue to weaken
investor demand going into 2023.

BUSINESS ENVIRONMENT“All market participants are acting very carefully,
so liquidity is going down. I expect transaction
volumes to fall off quite severely,” says a global
head of investment management.
The focus on environmental, social andgovernance (ESG) issues is clearly still importantto the industry, although the climate debate hasin part been drowned-out by the siren call ofmacroeconomic woes, with construction costs
inflated by congested supply chains. Yet as
consumer and industry fears around affordability
matters soar, real estate has an opportunity todovetail social impact efforts and environmental
stewardship – and tackle the materials andenergy crisis – with a radical approach tosustainability. Previous editions of Emerging
Trends Europe have found industry protagonists
reframing real estate as “social infrastructure”.
Many in the industry believe the time to makegood on that claim has arrived.
Says a global investment strategy chief: “Newdevelopment has slowed down, refurbishment
has slowed down, but despite this, the ESG
commitments that we have all made for the next
few years will have to be undertaken.”

All market participants are
acting very carefully, so
liquidity is going down. I
expect transaction volumes tofall off quite severely.

Figure 1-1 Real estate business sentiment, 2011-2023

Source: Emerging Trends Europe survey 2023

60%
50%
% increase

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40%
30%

20%

2011

2012

2013

2014

2015

Business confidence

Realism supersedes optimism
The survey signals a decline in profits andconfidence in 2023, reflecting a cautionary moodacross the industry. This is markedly different
to last year, when there was a coming-out-oflockdown peak in sentiment.
“The availability of both equity and debt capitalhas declined. Investors have become more

PREVIOUSCONTENTS

2016

2017

2018

Business profitability

selective and banks have become more risk
averse,” notes a global head of real estate
investment.
However, while the proportion expecting
business confidence, profitability and headcountto increase has fallen compared with 2022, theoverall share is still higher than in year one ofthe pandemic. Headcount remains the mostpositive indicator with 56 percent of respondents
expecting numbers to remain the same.

NEXT

2019

2020

2021

2022

2023

Business headcount

The results suggest that the currently tight labour
markets are on the whole driving a staff retention
policy with only 10 percent of respondents
envisaging letting people go.
“We have a lack of labour forces, and we havepressure on salaries and wages, which never
happened in the middle of a recession before,”says a pan-European real estate CEO.

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Figure 1-2 The European business environment issues causingSource:
concernin 2023
Emerging Trends Europe survey 2022
Even so, European real estate faces a major
challenge from a quartet of inter-linked economic
headwinds, and there is a noticeable increasein concern from industry leaders compared with2022.
Worries over inflation, interest rates, European
and global economic growth are all sharply
up on last year — and even then, they werestarting to alarm a majority of respondents. But
this time, there is almost complete consensus
that inflation is “concerning” — according to
91 percent of industry leaders. This contrasts
markedly with 2022 when the greatest concern
was cybersecurity, according to just two-thirds of
respondents.
“It’s very difficult to stay competitive in thisinflationary environment,” concludes aroundtable of ULI members in Belgium andLuxembourg.
Only a few perceive an upside to the inflation
issue. “If money becomes worth less, existingmoney will be invested more in real estate. Highearners are still buying property as an inflation
hedge,” according to a panel of Austrian property
professionals.
Unsurprisingly, interest rates follow closely
behind as a chief concern on 89 percent, whilesluggish European growth is another red flag for
88 percent of respondents. Downturn risks in the
global economy are significant for 81 percent ofrespondents – twice as many as last year.

Overall % concerned

If money becomes worth less,existing money will be invested
more in real estate. High earners
are still buying property as an
inflation hedge.
“Europe has little gas and oil, which is making
energy expensive. The risk is that locations
across the continent will lose their attractivenessfor industrial and commercial production, andinternational companies will be the first to leave,”warns a global head of real estate.
“We really must get a grip. We can’t rely on
China for our economy, on the US for our
national security, and on Russia for our energy,”
states the CEO of a pan-European developer.

Inflation

2023

2022

2021

91%

59%

29%

89%

55%

28%

88%

50%

90%

81%

43%

87%

49%

30%

35%

48%

67%

54%

37%

30%

62%

35%

27%

40%

33%

27%

40%

32%

44%

70%

28%

42%

41%

25%

55%

80%

Interest rate movements

European economic growth

Global economic growth

Currency volatility

Cybersecurity

Business liquidity issues

In August, US president Joe Biden signed
the Inflation Reduction Act into law, a policy
designed to reduce the country’s deficit while
potentially easing consumer spending on
healthcare. Notably, it has also been called thelargest climate investment in US history, withseveral provisos to increase energy security. It
will largely be paid for by corporations.

Deglobalisation

The EU and UK response has included thecentral banks of both raising interest rates.

Digital transformation

Sudden shifts in consumer demand

Management of the workforce

Business interruption

Not at all concerned

Not very concerned

Neither/nor

Somewhat concerned

Very concerned

Source: Emerging Trends Europe survey 2023

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Figure 1-3
European business environment
concerns for 2023 and over the
next five years
Inflation
91%
13%
Interest rate movements
89%
73%
European economic growth88%
76%
Currency volatility
49%
39%
Cybersecurity
48%
48%

35%
38%
Digital transformation
28%
34%
Next 3-5 years

While the inflationary risk is highlighted bysurvey respondents and interviewees, theyalso express grave concerns about the impact
on business of rising interest rates.
“The fact that interest rates shot up andbecame volatile and unpredictable hasn’t
helped the investment market,” says one realestate fund manager.
Nearly three quarters of survey respondents
believe Europe will move into recession
before 2023, further cementing the hit todevelopment activity provoked by the last
two years of supply chain woes, increasingly
high borrowing costs and a general lack offinancing. Germany and the UK look unlikely
to escape this fate, while countries such as
France and Spain are more insulated thantheir neighbours, largely due to how theysource energy.
Several respondents flag the centrality ofenergy security as a predictor of recession orat the very least, an economic slowdown.

Deglobalisation

2023

As it announced a record rise of 75 bps in
September, the European Central Bank statedthat “a gradual but sustained path of further
increases in interest rates will be appropriate”.

Note: Combined percentage of“concerned” and “very concerned”
respondents.

One German managing director voices thewidespread fear over Germany’s fate should
Russia turn off gas pipelines permanently. “IfPutin really cuts off the gas supply, I would
assume that we [in Germany] are ending up
in lockdowns again.

Or, let’s say, closures of certain parts ofbusiness, which are probably not system
relevant.”
Due to the fractured nature of the energy
security issue, however, views on recession
risk vary across Europe. According to thesurvey, recession is very likely before 2023
for 83 percent of respondents in Germany,
82 percent in the UK, 79 percent in the
Netherlands, and 68 percent in Spain. In
contrast, Italian (50 percent) and French (45percent) respondents are more sanguine.
“The key is going to be how long are wegoing to live with high inflation and high rates,
because these translate into a recession andcan further translate into stagflation,” says theCEO of a Spanish real estate firm.
A Netherlands-based managing director adds:“I don’t think there will be a deep recession,
but there may well be two or three quarters of
slowdown.”
Over the next five years, the industry indicatesa similar level of concern over many of the
key business issues, with European economic
growth (76 percent) and interest rates (73percent) in pole position, followed by global
economic growth.
“I would think there’s definitely going to
be a slightly more challenging businessenvironment for the next three to five years,”
notes a senior management figure at a private
equity firm.

Source: Emerging Trends Europe survey 2023

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The fact that interest
rates shot up and became
volatile and unpredictable
hasn’t helped theinvestment market.
The exception here is inflation: as interest
rates rise, just 13 percent of respondents areconcerned about its medium-term impact.
A UK-based global real estate head explains:“We forecast that inflation rates will remain
elevated until Q1 of next year, and then taper
off to around 2 percent, 2.5 percent over theremaining window. Interest rates should be
similar.”
A Europe-based head of investment strategy
for a global real estate fund is also optimistic:“I think inflation is going to peak relatively
soon. It will probably peak at some pointin the next three to six months. Oil prices
have already gone down and the market is
expecting interest rates to peak probably by
the end of 2022, maybe 2023, and then go
down, triggered by a recession.”

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Building a sustainable future
Despite the macroeconomic uncertainty,
environment and sustainability strategies remain
key priorities for most industry leaders in 2023.
For many of them, climate risk represents thebiggest challenge facing real estate.

today, although this could tie in to their longerterm observations. Indeed, 64 percent ofrespondents see sustainability requirements
and regulations as a key concern over the next
3 to 5 years.

“There is no single discussion you will have withany peer in real estate that does not end up
referencing ESG and decarbonisation,” says aEuropean head of asset management.

Those who are less concerned suggest they
have more urgent priorities. “The short- andmedium-term concerns are the market’s
inflationary tendencies. In the long term, theissue is the environment,” says a real estate
investment manager.

The environment will be a significant issue formore than half of property professionals in the
coming year. The surprise is that 45 percent ofrespondents do not regard this as a concern

The likelihood of greater regulation shaping ESG
has been a recurring theme in Emerging Trends
Europe over several years, but this time thesurvey suggests a step-change in its importanceto the industry. Half of the respondents regard it
as an issue for the coming year and even moreso, 60 percent, for the medium term.
For one pan-European CEO, this emerging
trend is long overdue. “We created a lot of newrules such as those governing taxonomy in
the last few years, which many saw as anotherlayer of bureaucracy, rather than a new wayof considering our overall contribution and thenecessary, and deep transformation towards amuch more sober way of doing business.”

Figure 1-4 Real estate business issues in 2023 and over the next five years

92%

Note: Combined percentage of “concerned” and “very concerned” respondents.

84%
76%

73%
55%

64%

60%

53%

51%

48%

42%

Construction costs

2023

There is no single
discussion you will havewith any peer in realestate that does not end
up referencing ESG anddecarbonisation.

Availabililty ofresources

Environmental
sustainability/
decarbonisation
requirements

Availability of(re)finance

48%
37%

Increased regulation(national/international)

Availability ofsuitable assets/landfor acquisition &development

44%

Asset
obsolescence

31%

33%

Covenant & loan
servicing issues forexisting loans
Source: Emerging Trends Europe survey 2023

Next 3-5 years

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However, respondents’ top two real estateissues for 2023 are construction costs (92percent) and availability of resources (84percent) in the light of materials and labour
shortages and related inflationary pressures.
While construction costs have been at ornear the top of industry concerns for years,
supply-chain issues that started during the
pandemic have been exacerbated by war
in Ukraine, with fuel, copper and aluminium
particularly affected. Russia and Ukraine arealso key exporters of speciality metals, andthe conflict has caused significant disruptionof labour in the construction trade.
“Higher construction costs are down to twothings. High commodity and fuel prices, butalso supply chain disruptions,” suggests one
real estate strategy head, before noting thatthe latter “are starting to ease”.
Yet the survey indicates that significant
improvements on the construction front are
unlikely in the coming three to five years.
Around three quarters of respondents believethat construction costs and availabilityof resources will remain top of the list ofconcerns over that period.

Figure 1-5 Real estate business issues causing concern in 2023

Disrupted supply chains have led to “anexplosion in construction prices”, according toa European head of real estate investment.
“Binding construction cost commitments,from one’s own contractor as well as fromothers, are no longer available. This makesplanning difficult.”

Overall %concerned

Construction costs

92%
Availability of resources

84%
Environmental sustainability/decarbonisation requirements

55%
Availability of (re)finance

The whole issue of
construction is actually
very hot at the moment,
and anyone who has tobuild now is expecting a costescalation that would havebeen unimaginable
12 months ago.

53%
Cap rate expansion

53%
Increased regulation (national/international)

51%
Availability of suitable assets/land for acquisition and development

48%
Asset obsolescence

37%“The whole issue of construction is actually
very hot at the moment, and anyone who has
to build now is expecting a cost escalationthat would have been unimaginable 12months ago,” says one pan-European asset
manager.

Covenant and loan servicing issues for existing loans

31%
Not at all concerned

Not very concerned

Neither/nor

Somewhat concerned

Very concerned

Source: Emerging Trends Europe survey 2023

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The impact of war
As might be expected, Russia’s invasion of
Ukraine is the top social-political issue fornearly 90 percent of industry leaders, butlargely for indirect reasons. The inflationary
environment and all its consequences are theprime issue, with few respondents describing
the impact of war in strictly territorial terms.
“We haven’t seen direct effects — but energy
costs have just exploded. That coincided withhigh inflation, which was around before, has
led to interest rate reactions by the respective
institutions that affect everyone who works inreal estate,” says a pan-European real estateCEO.
The second highest social-political concern isinternational political instability (79 percent)while European and national politicalinstability also feature. Though the war in
Ukraine is uppermost in the minds of many,
the arrival of new political leaders in the UK,
Sweden and Italy is also informing sentiment.
The populism factor has not gone away inEurope, Brexit seems far from being resolved,
and inter-European relations are likely to beon an evolutionary course in 2023.
“Italy is like a time bomb for Europe, while
the UK, also because of the Brexit issue,
has been at a standstill for six months,” says
the senior managing director of a global realestate firm.

“Occupancy is the highest it has ever been,rent growth is the highest it has ever been.
Customer demand is still really, really strong,”says one pan-European logistics developerand investor.

Financial markets are wary as to whether
Italy’s new far-right coalition government
could spark another European sovereign debt
crisis following promises of increased public
spending. Likewise in the UK, “trickle-down”
economic policies have attracted criticism forextending government borrowing while thecountry braces for recession.

In general, the potential weakness in occupierdemand in most other sectors is influencing
a broad shift to a more cautious approach torisk, even for those already in the core space.
As covered in more detail in Chapter 3, thejury is still out on how distress will emerge
from the prevailing market conditions. On thewhole, interviewees do not foresee an influxof poorly performing assets onto the market,
but the deep discounts to net asset value inthe listed sector during 2022 are ringing alarm
bells for property values in the coming year.
With open-ended funds there are concerns
over the distress risk and a possible run onredemptions. Institutional investors are also
assessing the so-called “denominator effect”
of falling values in other asset classes on theirreal estate allocations.

Given the overall downbeat mood, onlyaround half of this year’s survey respondents
expect to be net buyers of European realestate next year. This figure is down on lastyear (59 percent) and slightly more bearish
than survey respondents were during the
pandemic – 55 percent were net buyers in the2021 report. If anything, however, sentimenthas dipped further since the survey was
conducted in the summer.
“We’ve already seen some of the more highly
levered investors effectively cut out of themarket completely,” indicates a pan-European
developer.
Despite the overall uncertainty about the near
future, the interviews and roundtables reflect
differing views across sectors, specialisms
and geographies.
Though last year’s “safe haven” sectors, suchas logistics, are certainly challenged by themacroeconomic environment, pure logistics
specialists remain more buoyant than some of
their counterparts in other sectors.

“We will probably see distress to the extent
that certain funds suddenly become overallocated to real estate and therefore needto sell. Now, they won’t sell at any price, butthey’ll probably sell at less than what wewould call market prices because there’s
some kind of urgency,” says a pan-European
real estate chief.

51%

of respondents are aiming
to be a net buyer of realestate assets in Europe.
Figure 1-6
Appetite for European real estate in 2023
A net buyer of real estate assets in Europe

51%
59%
Buying and selling similar amounts ofreal estate assets in Europe

31%
26%
A net seller of real estate assets in Europe

17%
15%
2023

2022

Source: Emerging Trends Europe survey 2023

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Figure 1-7 Social and political issues causing concern in 2023
Overall %concerned

Russia’s invasion of Ukraine

88%
Political instability (international)

79%
Environmental issues (e.g. air quality/climate change)

76%
Political instability (Europe)

68%

There is a flip side to distress in a downturn,according to the CFO of a Nordic real estatecompany: “It is in troubled times that the best
deals are made, and I believe that the coming
time will open up opportunities for those whohave access to capital.”
Adds a pan-European CEO: “Bearing in mind
that economic uncertainty is not good for realestate, we believe that once healthy levels
of inflation and interest rates are restored,
confidence and investment in real estate will
return.”Housing affordability

65%
Social equality/inequality

60%
Political instability (national)

54%
Mass migration

42%
Not at all concerned

Not very concerned

Somewhat concerned

Very concerned

Neither/nor

Source: Emerging Trends Europe survey 2023

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Bearing in mind that
economic uncertainty is
not good for real estate, we
believe that once healthy
levels of inflation andinterest rates are restored,
confidence and investment
in real estate will return.

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ENVIRONMENTAL & SOCIAL IMPACT

CHAPTER 2

ENVIRONMENTAL& SOCIAL IMPACT“People are working much harder to measuresocial impact — to do the right thing and be
held accountable. But as an idea, it’s stillplagued by a lack of standardisation, and theindustry needs to work harder still to speakwith one voice about what it’s doing.”
UK fund manager

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ENVIRONMENTAL & SOCIAL IMPACT

For an overwhelming 93 percent of the industry leaders surveyed for Emerging
Trends Europe, running an environmentally and socially sustainable businessis the most important factor for successful organisational transformation inreal estate over the next 20 years.
“Those who didn’t pay attention to the three lettersof ESG until now hadn’t realised that we are
already in a time of transformation. As always,
the current crisis is accelerating existing trends,”
notes one pan-European CEO.
Nearly 90 percent of respondents highlight theimportance of creating social impact alongside
financial return over the next 20 years, while 60
percent identify the importance of increasing
diversity in their organisations.
“We now have a number of internal committees
tackling these matters, and our policies include
very progressive diversity and inclusion guidance,”
reports the director of environmental, socialand governance (ESG) at a global institutional
investor.
The challenge is always aligning actions withsuch laudable ambitions, and even more so ina year when questions around energy efficiency
and supply have affected every European
household, and net zero has become political
warfare. Real estate’s efforts have a renewed
criticality.
“We have to achieve an energy turnaround,
where buildings generate the energy they
consume themselves and can also feed energy
into the grid. Heat recovery, district heating, eventhe building materials should become moresustainable,” suggests a global head ofreal estate.

Others see the economic climate as a hindrance
more than a help in tackling ESG-alignment.
“The cost factors surrounding refurbishments
and new buildings at the moment could act as abreak in the market because of the uncertainty
in terms of what the end value is and what thecost of building really is,” says a global institutional
investor.
Yet the operational performance of buildings is
no longer just a part of the E in ESG. It has big
implications for the S, too — the social impact astenants face significant affordability pressures due
to high rents and now increasing energy costs.
This comes back to the concept of real estate as“social infrastructure” and if not addressed canaffect financial returns.
The S factor has gained visibility in recent years,
with industry leaders seeing it as a means ofimproving their organisations and serving thewider community. Progress is slow, however,according to the survey. When asked about
the social aspects in portfolios, the provisionof community spaces has been the industry’s
top priority during 2022 albeit increasing inimportance for just 57 percent of respondents.
Responses are slightly more encouraging overthe next five years.

Figure 2-1 The importance of ESG for the successful organisational transformation of thereal estate industry over the next 20 years
Running an environmentally and socially responsible business
1% 6%

34%

59%

Creating social impact alongside financial return
1% 3%

10%

51%

Not at all important

Not so important		

36%
Neither/nor

Somewhat important

Very important
Source: Emerging Trends Europe survey 2023

Figure 2-2 The changing importance of social issues within a portfolio
Perceived change in importance since beginning of 2022

Expected change in importance in next 3-5 years

Provision ofcommunity
space/publicamenities

2%

8%

30%

63%

Socialimpact/value
contribution

2%

52%

46%

9%

30%

62%

Access toaffordable
homes

3%

57%

40%

10%

29%

61%

Creationof local
employment/
training
opportunities

2%

64%

34%

5%

47%

48%

Supporting
local/small
businesses

4%

6%

49%

46%

42%

57%

68%

28%

Decrease in importance

Stay the same

Increase in importanceSource: Emerging Trends Europe survey 2023

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YOU ARE HERE

ENVIRONMENTAL & SOCIAL IMPACT

Figure 2-3 The diversity, equity and inclusion categories that companies areactively addressing

77%
50%

43%
35%
13%

GenderSocio economic

LGBTQ+BAME(Black, asian, andminority ethnic)

Neurodiversity
refers to alternative
thinking styles, such as
dyslexia, autism, ADHD
and dyspraxia

Source: Emerging Trends Europe survey 2023

“In the future, property owners will need to show
responsibility towards the community, as new
zoning plans will be much more strictly regulated
over the next ten years,” says one Swedish property
player, adding however that “financial incentives will
be required to get the private sector on board”.
Indeed, the industry has already started torecalibrate how it looks at social impact. Earlyattempts to make real estate “humancentric” were
often simply about tenant retention; today, they
have evolved into wide-ranging programmes todeliver projects whose overall value is linked totheir social worth. These include conspicuous
health and wellbeing solutions for a postpandemic world, as well as diversity targets andlocal employment drives.
If offices are now for collaboration, since solo
work can be done by many at home, spaces
need to promote interaction and creativity. Retailled schemes and mixed-use developments must
increasingly foster community engagement
to achieve commercial success. Perhaps thebest opportunity lies in broadening the use ofresidential amenities, so they serve the individual
and the wider community, across both private andsubsidised housing.
Not all industry leaders are wholly convinced
about the cost benefits of providing sociallyinspired amenities. As one Austrian interviewee
concludes: “It pays off for larger projects, but notfor smaller projects.”

LGBT PRIDE PARADE IN ISTANBUL, TURKEY

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However, the growing awareness of the realestate’s broader role and obligations in society
underpins more and more decision-making
across the industry. If cities are ecosystems,
then buildings and their users are in a state ofsymbiosis. And like any habitat, small changes canhave a big effect.
Recent headwinds such as the tight labour market
and the resulting war for talent, housing supply
pressures and Europe’s energy security crisis
have huge implications for both society and realestate. The industry, more than ever in “hands-on”,
operational mode, evidently has further problems
to solve.
For some, this is where the diversity, equality andinclusion (DEI) issue also plays in. This matterhas emerged simultaneously on more than one
continent in recent years, fired by simmering
racial tensions and questions around poverty,
opportunity and social justice.
When it comes to promoting DEI in theirorganisations, 50 percent of real estate leaders
say they are actively addressing socio-economic
policies this year compared with 37 percent lastyear.
But in the face of worsening economic conditions,the industry again seems poised between riding
out the storm or trying to harness it to sail forwardwith greater speed.

YOU ARE HERE

ENVIRONMENTAL & SOCIAL IMPACT

According to one global investment manager: “Thereal estate industry needs highly skilled people witheven more ‘dimensions’ than 10 years ago. And I findthis particularly interesting because it shows thatyou cannot automatise our industry. We call it anindustry, but it is everything but an industry, it is all
handmade.”

While residential features ever more significantly on
the allocations of investors interested in playing asocial role, one real estate lender flags the hypocrisy
risk: “If you have a business plan where you set
rent increases of 10 to 20 percent, that makes total
sense from an economic point of view, but can thatstill be called ‘social’?”

Whatever the medium and long-term outlook forsocial matters in real estate, some would say thatthe current macroeconomic conditions — chiefly
high inflation, high energy costs and rising interest
rates — strengthen the case for urgent action
because they disproportionately affect poorer
members of society.

Real estate’s priorities have always been in aconstant state of evolution although it seems like thedated caricature of grasping landlords unconcerned
for their tenants’ welfare can be substantiallyarchived. Yet how the property world fully andsatisfactorily aligns future profits with a wider social
objective is still in flux.

Yet there remains a sense across the industry thatthe required legislative lever for social impact isconfined to development and largely missing in allother aspects of real estate activity. “There are no
established criteria for social impact investment rightnow. Except one, which is affordable housing,” notes
a global head of investment management.
And where the state does intervene, there is no
guarantee of success. For example, Danish property
professionals note that the City of Copenhagenrequires that as much as 40 percent of all new
homes are affordable — recently raised from 25
percent — which could drive developers away fromthe sector altogether.

The real estate industry
needs highly skilled people
with even more dimensions
than 10 years ago.

When it comes to self-directed action to tackle
social equity, progress remains ad hoc. Several
interviewees are proud of initiatives to train and hire
local labour, but housing affordability overall is welldown the list of criteria for survey respondents whenselecting a city for investment.
TALL BUILDINGS ON A CONSTRUCTION SITE REFLECTED ON GLASS IN WEMBLEY, UK

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YOU ARE HEREREAL ESTATE CAPITAL MARKETSCHAPTER 3

REAL ESTATECAPITAL MARKETS“Our investors are really cautious, and notjust for real estate. It’s not the time when theywant to build up more exposure to virtually any
asset class. I don’t say we see a lot of capitalpulling out of the market, but it’s difficult togrow at the moment.”
Pan-European investment manager

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YOU ARE HEREREAL ESTATE CAPITAL MARKETS

After a decade of plentiful liquidity inEuropean real estate capital markets,
when asset prices rose in most sectors
in most countries, the story haschanged dramatically as the industry
looks to 2023 and beyond.
Inflation is up, interest rates have risen andhave further to go, industry leaders believe, andrecession is a spectre that haunts European
economies. Equity and debt, in turn, are harder tocome by, and interviewees report that valuations
have fallen significantly in major markets, albeit
empirical evidence is limited so far.
Though liquidity may not disappear altogether
as it did during the global financial crisis (GFC),
confidence in the availability of capital has sunk
to its lowest level since those dark days. And
a confluence of economic factors means theindustry is facing a reckoning that many thought
would arrive in the wake of COVID-19. Instead, it
has come 18 months later.
As one large private equity investor says:“You’ve got dead markets that are meaningfully
much less liquid than they were.”
Another global player adds: “It doesn’t feellike the GFC. It’s not necessarily an enormous
liquidity crisis. There’s a lot of good news stillcoming through, and people aren’t levered in thesame way that they were. However, the relativevalue of other asset classes means there’s
no doubt there’s going to be a repricing. It’s
happening already.”

Figure 3-1 Expectations for the
economy and inflation

Europe facing recession
Seven out of 10 survey respondents believe
Europe will move into recession — before 2023 —and views about the prospects for the economy
and the real estate sector have become rapidly
more negative as a summer of uncertainty
turned into an autumn of consistently downbeat
forecasts.

2%
13%

24%

Europe will
move into a
recessionin 2022

Industry leaders believe that liquidity will
decrease farther in a market of lower investment
volumes, rents and occupancies. Development
will fall sharply. There is, though, more debate
about the extent of any re-pricing.
Much depends on the severity and duration of
the recession, and as interviewees point out, theeconomic circumstances and market conditions
behind previous downturns are all quite different
from what Europe is experiencing today.
“You’re looking at a 50-basis points correction
for a mild recession scenario, where things justslow down,” says one fund manager. “But you’ve
also got quite a lot of examples of downturns
that became quite quickly more entrenched andexacerbated by other factors.”
In the GFC, one of those factors was the
all-out disappearance of liquidity. Today it could
be chronic energy supply shortages leading toblack outs for homes or shutdowns in industries
like steel production, which could lead tosignificant unemployment and reduction ineconomic output in some European countries.

CONTENTS

15%

47%

1%
17%

21%

Inflation will remain
significantly above
normalised levelsof 2-3% for the
next 3-5 years

10%

51%

Not at all likely

Not very likely

Somewhat likely

Very likely

Source: Emerging Trends Europe survey 2023

PREVIOUS

Figure 3-2 Primary drivers of arecession in 2022

NEXT

31%
31%
14%
11%
9%
1%

Continued
high inflation

Continued
high energy
pricesGeopoliticalevent

Decreasedconsumerspending
Continued
supply chain
disruptions
Risingunemployment

Neither/nor
Source: Emerging Trends Europe survey 2023

YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Though leasing activity held up reasonably well formuch of 2022, interviewees are unanimous in theiropinion that a recession will lead to occupancies andrents falling, even in previously strongly performing
sectors.
As one investment manager says: “Once therecession hits, don’t forget some of these occupiers
will stop paying their rent, some will leave that building,some will be coming back to us, saying, if you don’t giveme a rent reduction, we’re going bust and we’re gone
forever.”With widespread forecasts of a decline in consumer
spending, retail is likely to be first to suffer but withknock-on effects in the logistics sector. “With theconsumer retrenching, I think occupiers are going
to run down stock, saying, we don’t need that much
more space right now, given the economic outlook,”
an opportunistic fund manager says. “The drivers ofunderlying demand are just not going to be there,
and therefore we need to put different rental growth
assumptions into our models.”Figure 3-3 The impact of a recession by the end of 2022
Overall % that
expect a decrease

Availability of real estate supply

41%
Existing rental values of real estate in Europe

55%
Occupancy levels of real estate in Europe

60%
Real estate investment volumes in Europe

77%
Availability of finance75%

The drivers of underlying
demand are just not going
to be there.

Development activity

86%
Increase substantially

Increase somewhat

Decrease somewhat

Decrease substantially

Stay the same

Source: Emerging Trends Europe survey 2023

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YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Figure 3-4 Country transaction volumes, Q4 2021–Q3 2022 (€bn)
Finland

Displayed on map

Q4 2020–Q3Country 			2021% Change

Germany

77

101

30%

United Kingdom

76

87

15%

France

35

39

12%

Sweden

25

28

11%

Netherlands

24

18

-23%

Spain

14

15

9%

13

6

NorwayQ4 2021–Q3
2022

Italy

10

Denmark

11

11

-2%

Norway91122%Poland6

7

11%

Ireland6

7

11%

Austria6

7

5%Finland

5

6

17%

Switzerland

6

5

-9%

Belgium

3

5

75%

Portugal

2

3

15%

Romania

1

2

42%

Czech Republic

1

2

62%

Slovakia

1

1

94%

11

Sweden28

Denmark

11

Ireland

7

UK

Netherlands

87

18

PolandBelgium

29%

5Germany

101

France Switzerland

39

Portugal

3

5

Italy

Czech
Republic

2

Austria7

7

Slovakia

1

Romania

2

13

Spain

15

Source: MSCI Real Assets

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YOU ARE HEREREAL ESTATE CAPITAL MARKETS

26%

of respondents expect to be

Inflationary pressureable to ‘fully’ apply indexation to

The major influence on real estate sentiment is
inflation at a 40-year high and the impact thathas on economies and the actions of central
banks.

their existing retail leases

Figure 3-5 To what extent can indexation be applied to leases?
Logistics

6%

43%

51%

Offices

7%

46%

46%

Most industry leaders canvassed for this reportagree that the prospects for real estate havenot completely fallen off a cliff, at least partly
because the asset class is long regarded asa hedge against inflation. The interviews androundtables indicate this has attracted someinvestors in 2022.

Residential

11%

62%

28%

Retail

12%

61%

26%

Not all

Partially

Fully

But judging the correct response to prolonged,
above-average inflation is certainly a matter ofongoing debate across the industry. For instance,
more than half of survey respondents say they
expect to be able to apply full indexation totheir leases in logistics, falling to 46 percent in
offices and closer to a quarter in the retail andresidential sectors.

Source: Emerging Trends Europe survey 2023

“Real estate only inflates when there’s anundersupply of it,” one global investor says. “Youcan inflate the top line rents in the same way that
other consumer goods are inflating. So, logistics,
residential, maybe hotels, they respond very wellin an inflationary environment. But then poorquality office and most retail is going to deflate
rather than inflate.”

Figure 3-6 Inflation and interest rates expectations for 2023
Inflation
Long-terminterest rates
Short-term
interest rates

5%

32%

1% 10%

15%

1% 5%

11%

Decrease significantly

Decrease somewhat

Increase somewhat

Increase significantly

13%

34%

58%

58%

17%

16%

At the same time, raising rents might not beenough to offset a rise in investment yields, aparticular problem in sectors like logistics orresidential where yields are very low.

25%

Stay the same

Source: Emerging Trends Europe survey 2023

PREVIOUSCONTENTSNEXT“I’m not standing there saying real assets isgreat, it’s the best inflation hedge, you should
pile in,” one global pension fund investor says,“because nothing’s a great inflation hedge
when interest rates are rising at the rate they’recurrently rising, off the levels of yields we’ve got
in all real asset markets.”Though there is more occupier demand than
supply in residential, especially at the affordable
end of the market, the issue of raising rents inline with inflation in this sector is complex. Just
because you can raise rents, should you?
“With this inflation, people may not be able toafford the rents anymore, making it a societal
problem and a political issue,” one pension fundinvestor says. “And that’s when markets become
distorted, when politicians start interfering.”

With this inflation, people may
not be able to afford the rents
anymore, making it a societal
problem and a political issue.

YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Figure 3-7 Availability of debt and equity in 2023

Capital pulls backCentral banks have responded to above-average
inflation in 2022 with interest rate increases, andthere is the prospect of more to come. After many
years at close to zero percent, these base rate
hikes ripple through every element of real estate
capital markets, making the outlook gloomier
than at any point in the past decade.
The survey signals a significant decline in capitalfor investment in 2023. Whether it is equity or
debt, for new investments and refinancing or for
development, more respondents think availability
will decrease than stay the same or increase in
2023. As recorded by Emerging Trends Europe,
confidence in the availability of debt and equity
has not been this low since 2012 and 2009
respectively.
“We have a big open-ended fund in Europe,
every quarter we’re out raising new capital, andthat has definitely slowed down,” one investor
says. “People are sitting there saying, well, we’ve
had this overall financial market correction, so I
just need to know where I’m at,” an opportunity
fund manager says.
Capital raising is likely to be challenging,regardless of source. Survey respondents believe
capital from every part of the world is less likely
to increase in 2023 compared with expectations
last year. And there is no region where
respondents feel capital is more likely to increase
than decrease.

New opportunistic capital, typically from theUS, will be in particularly short supply. Butinterviewees are generally paying more attention
to the type of capital, the returns it is targeting,and the reasons it is investing in real estate,than its geographic origin. In this respect, it isclear that the interest rate rises by the Bank ofEngland and European Central Bank (ECB) so
far have hit different types of investors in different
ways. For core investors, particularly pension
funds and insurance companies, the rate rises
have reduced the attractiveness of real estatecompared with other asset classes, notably fixedincome.

Debt for development
23%

For pension funds and insurance companies,
there is also the fact that falls in the value of
their equity and bond portfolios can hinder theamount they invest in private real estate. This“denominator effect” means that an allocation toproperty, slower to be revalued than other asset
classes, will increase relative to falling equity andbond values and prevent further investment.

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47%

18%

11% 2%

Debt for refinancing or new investment
9%

55%

23%

13% 1%

25%

10% 2%

Equity for development
18%

45%

Equity for refinancing or new investment
6%“The major insurance companies that were
investing in real estate as a bond surrogate arepausing and saying, real estate is good, but why
would I Invest in it at a 3 percent yield when I canbuy good corporate credit at 2 percent?”
With real estate losing its advantage over bonds,
whole markets can look unattractive, according
to one fund manager active in rented residential:“We decided to move out of Poland, for instance,
because the return on a Polish bond is higher
than the return on real estate.”

Source: Emerging Trends
Europe survey 2023

47%

Decrease significantly

Decrease somewhat

30%
Stay the same

15%

2%

Increase somewhat

Increase significantly

Figure 3-8 Expected cross-border capital into Europe in 2023

Source: Emerging Trends
Europe survey 2023

Americas
10%

35%

19%

30%

7%

Middle East and Africa
8%

36%

28%

24%

4%

22%

4%

Asia Pacific
11%

38%

26%

Europe
4%

NEXT

33%

46%

16%

Decrease significantly

Decrease somewhat

Increase somewhat

Increase significantly

1%

Stay the same

YOU ARE HEREREAL ESTATE CAPITAL MARKETS“At the moment, if we want to do a newinvestment, we have to sell something else andfree up money somewhere else, because of thedenominator effect,” one global pension fundinvestor explains.

Figure 3-9 Returns targeted compared with the previous year

2021

10%

2022

2%

2023

6%

Significantly lower

29%

36%

21%

36%

25%

Somewhat lower

Unchanged

26%

Somewhat higher

It should be noted this is less of a problem forinvestors that split their allocation between
listed and unlisted property – the value of theirproperty shares has gone down too.

8%

30%

31%

33%

4%

For investors that rely on debt, as interest rates
rise, the price they pay for that debt also rises.

4%

Consequently, the price they pay for an asset
must fall for leveraged investors to hit their target
returns.

Significantly higher

Source: Emerging Trends Europe survey 2023

As one listed company executive says: “Private
equity is no longer capable of sharpening the
pencil too much in pricing, because their accessto debt is now hampered by the increasing debt
costs.”

Figure 3-10 Expected ability to secure senior debt in 2023 compared withthe previous year
3%

4%

2%

2%

2%

18%

16%

14%

11%

11%

34%

32%

Unleveraged investors are demanding lower
prices because for the first time in a decade they
can get equivalent returns elsewhere from lessrisky sectors than real estate.

24%
46%

54%

Leveraged buyers are seeking to pay lessbecause the cost of debt has gone up. Either
way; this points to values falling further in 2023,
which is at odds with survey respondents who
say they have the same return expectations aslast year.

47%
40%

45%
24%

37%
16%

7%

2%

5%

Value-added
real estateCorereal estateNew
investment

Development
finance

Refinancing

Unchanged

Decrease somewhat

Decrease significantly

Increase significantly

Increase somewhat

5%

Source: Emerging Trends Europe survey 2023

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Private equity is no longer
capable of sharpening the
pencil too much in pricing,
because their access to debt
is now hampered by theincreasing debt costs.
It is evident that the uncertainty spreading
through economies and markets has worsened
since the summer when the survey was
conducted.
“We think everything’s going to be worth lessnext year than it is this year,” one bank lendersays “Now, that’s obviously a generalisation.
There can be reasons why a particular asset
would outperform. But if you just bought a
relatively dry asset, we think it’ll decrease invalue over the next 12 months. So that makes
it quite a challenging time to look at financing
things.”As one investment manager puts it: “If you werebuying a deal last year, and you were trying tounderwrite to a mid-teens or a high teens return,and that underwriting was predicated on a twoand a half percent exit cap rate, you are done.”

YOU ARE HEREREAL ESTATE CAPITAL MARKETSWith values already falling, thecoming year could be a great buying
opportunity for core investors that are still
under-allocated to the sector, one suchinvestor points out. This would represent
something of a shift from the last few years
when, as highlighted in Emerging Trends
Europe, the high price of existing prime assets
led some investors to pursue “develop-to-core”
strategies. Even so, those well-capitalised
investors that still prefer the “develop-to-core”
approach may yet benefit in a market whereland prices will also likely fall and wherecompetition among developers is expected to
be in sharp decline.
Right now, this is more theory than practice.
Most interviewees are experiencing the sortof market logjam that occurs at all timesof economic uncertainty, when buyers andsellers cannot agree on the price of assets.
“We’re seeing very little volume because as
usual, the buyers of real estate want to lookforward because they have to own the assets
tomorrow,” one value-add fund manager says.
“But the owners want to look backwards,
because they owned it yesterday. That creates
the bid/ask spread.”
Another fund manager adds: “We might not
be in this horror-show scenario of a deep andlong recession. But we might be, and if you’re
investing now, you need some compensation
for that in the form of higher returns.”

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YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Preparing for someform of distress
Most industry leaders express the hope that
inflation will peak in the coming year, which
would bring clarity over how much central banks
are likely to raise interest rates. Assets might beworth less at that point, but there would be more
direction over where values are likely to settle.
“You don’t want to catch a falling knife,” one
global pension fund investor says. “You won’t
really see a lot of activity until one of two things
happens: Until you start to see the inflation trend
come down significantly, so you know where theFederal Reserve, the Bank of England and the
ECB are going to go. Then I think you’ll start tosee people going back in.”But as that same investor adds: “If that doesn’t
happen, it’s when you see a level of distress thatpeople can say, okay, there’s long-term value
there.
The potential for distress has been a topic ofgreat debate among both investor and lendersinterviewed for this edition of Emerging Trends
Europe.
The consensus view is that the level of distressis highly unlikely to reach the proportions of theGFC because leverage levels are so much lower– the industry has learned its lessons in thewake of the collapse of Lehman Brothers.

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You don’t want tocatch a falling knife.
But the rise in interest rates will undoubtedly
create stress, which means some owners will
have to sell at a reduced level. As one valueadd investor points out, much attention will be
paid to investment deals completed in 2018 and2019, which were the two highest transactionvolume years ever in Europe. “Much of that will
have been funded with five-year loans, and thoseloans come due in 2023 and 2024. Those loans
were made at a time of quantitative easing andwe’re now at a time of quantitative tightening,margins have blown out and the reference rate
has blown out.”Those loans are likely to have been made at aloan to value (LTV) of 50 to 60 percent but falling
values might mean those LTVs are now theequivalent of 70 to 80 percent, a level at which
lenders may be reluctant to refinance.
More importantly, loans underwritten wheninterest rates stood at 1 percent will now haveto be underwritten at rates perhaps three orfour times higher. In other words, the ratio by
which the income covers the interest payments
will have dropped dramatically. And when arecession bites, occupier performance will be
weaker, which could erode the income being
used to pay the interest on loans.

YOU ARE HEREREAL ESTATE CAPITAL MARKETSVIENNA, AUSTRIA

Under such conditions, some borrowers mightwell put up more equity and pay down debt. Butothers may be unwilling or unable to do that —closed-ended funds, for example — and end up
precipitating a sale.
And whereas banks were willing to “extend andpretend” after the GFC, the fact that the distressis not quite as acute this time might actuallyprompt them to push for sales more quickly.
As one fund manager says, loans went from80 to 90 percent LTV up to 120 to 130 percent
during the GFC and so “there was no reward for[banks] acting early. Now it has gone from 60 to
80 percent, they are not going to lose money ina sale, so it is the borrower’s problem, not theirs.”
The implication is that if borrowers choose notto put in more equity, sales are likely to comethrough much faster than in the post-GFC
period. That will lead to price discovery, which
could crystallise price falls for all asset owners.
Moreover, the Bank of England’s slotting
regulation and Basel III European banking rules,
due to come into force in 2023, mean that it will
become more expensive for banks to hold loans
when LTVs rise, which will further incentivise
them to push for sales.

The FTSE EPRA NAREIT index of real estate
stocks in developed European markets fell over
40 percent from the start of 2022 until the endof September. Though property share prices
partly reflect wider equity market sentiment,
the index here indicates that stock market
investors believe real estate values are goingto fall. This could be seen as an opportunity bythose investors that think stocks have alreadyfallen further than the expected decline in theunderlying assets.

Loans went from 80 to 90
percent LTV up to 120 to 130
percent during the GFC and so
there was no reward for banks
to act early. Now it has gonefrom 60 to 80 percent, they
are not going to lose money ina sale, so it is the borrower’s
problem, not theirs.

There is another sign of falling prices — andthe potential for capitalising on distress — and itcomes in the form of the listed property sector.

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YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Lenders pull in their horns
Lenders’ balance sheets are generally far
healthier coming into this period of uncertainty
than in the GFC. Even so, it is little surprisethat survey respondents expect a decrease infinance in 2023 from all lenders, not just banks,
compared with last year.
“One of the fundamentals is the overall costof borrowing going up, even if we don’t move
margins, because we’re now having to fundourselves at a slightly higher level,” one banker
says. “Even if you look at banks who fund loans
off deposits, they’re having to pay interest on
those deposits for the first time in a long time. So,
everyone’s cost of funds goes up, and that has tothen get washed through the system.”
It is also clear that lenders are seeing andaddressing the same risks in the market as
equity investors. “Most banks have effectively
had to move their margins up,” one banker says.
“All the banks run risk models, and most of thoserisk models will have the probability of default,
which is heavily influenced by the level where therental income services the interest costs.”
It is not quite the death spiral endured in theGFC, but there is a vicious circle in terms of theactions of lenders in the market. If transactions
are down, fewer investors are repaying loans,and that means banks have less capital to makenew loans. “The bank’s balance sheet is notendless,” says one interviewee, and the same istrue for all lenders.

The bond market is also influencing real estate
lending. Interviewees suggest that institutions
like insurance companies that have been big
lenders to real estate might now find it more
attractive to buy lower-risk corporate bonds.
Indeed, survey respondents are more negative
about the prospects for new lending frompension funds and insurance companies thanany other type of lender except banks.
But it also means that a financing avenue tappedby larger property investors, particularly REITs,
is now effectively closed. As a consequence, they
are looking to the traditional secured lending
market again, reducing liquidity for everyone
else.
“What we see is that some of our larger clientsthat typically would access the capital markets
for funding don’t have that alternative available
to them anymore, so they’ve been coming tobanks with quite sizeable requests for financing,”
one banker says. “But we’ve had to be selective.
So, some of the newer names, or ones that aremaybe a little less important from a franchisevalue standpoint, we’ve either had to say no, or
we’ve managed the amount.”

Figure 3-11 Expected availability of lending sources in 2023 compared with theprevious year
Other (non-institutional) non-bank lenders

7%

27%

22%

8%

37%

Alternative lending platforms (e.g. peer-to-peer/crowdfunding)

10%

25%

26%

7%

33%

Non-bank institutions (insurers or pension funds)

6%

28%

26%

38%

3%

Issuance of commercial mortgage-backed securities (CMBS)

9%

20%

35%

33%

3%

Banks

14%

The bank’s balance sheet
is not endless.

Decrease significantly

54%
Decrease somewhat

25%
Stay the same

Increase somewhat

6% 1%

Increase significantly

Source: Emerging Trends Europe survey 2023

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YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Though they are likely to remain active, thedebt funds indicate that what they are lending
against is already changing significantly. Withother lenders scaling down, the debt funds are,in effect, able to move down the risk curve but
still make the same return. “Our debt guys arehappier than I’ve seen them since we initiatedthe business, frankly. They’ve big grins on theirfaces,” one fund manager says. “They are able tolend large tickets for fairly good collateral at 400
to 500 over. Sponsors are a little bit less pricesensitive than they might have been in a morerobust market.”This shift supports the view among survey
respondents that debt and equity fordevelopment will be significantly reduced in the
coming year. But for lenders still consideringdevelopment proposals, they are doing so ina much more risk-averse way, partly due tothe uncertainty over rental growth in a fragile
European economy but also because of surging
costs of building materials and labour.
“We end up being comfortable with a smallerloan, and saying the developer needs to put up
more equity to increase the cost overrun budgetthat they have,” one debt fund manager says.
“They might put something in and it looks fine in
the normal environment, but we might say they
have to double or triple that, because we’re justnervous.”From a sustainability
perspective, the rise inconstruction costs and theshortage of labour could nothave come at a worse time.

From the equity investor perspective, given
higher construction costs and less certain
income, the interviews indicate that projects
slated for 2023 might be pushed back into 2024,

AERIAL TOP-DOWN VIEW OF A SKYSCRAPER CONSTRUCTION SITE

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or shelved entirely. As one fund manager says:“Every project is under review.”
This lack of new development is seen by someas a positive for existing assets and their owners.
“Coming into the year, there wasn’t meaningfulsupply in many major markets, and then it’s
been shrinking visibly, because replacement
cost has just literally moved up on everybody bysomewhere between 20 and 40 percent,” says
one global player. “Either the rents have to behigher [to justify starting a project] or there’s justgoing to be less development, both of which isgood for owners of existing assets.”
Such a view perhaps betrays a blind spot stillamong some in the industry when it comes totheir obligations in meeting net-zero targets.
While the decline in new development may begood for existing property owners in the here
and now, finance still has to be found for the
decarbonisation of existing assets throughretrofitting or refurbishment. Failure to address
climate risk raises the issue of obsolescence andstranded assets, which is covered in more depth
in Chapter 5.
“From a sustainability perspective, the rise inconstruction costs and the shortage of labour
could not have come at a worse time,” one
private equity investor says. “Target dates forcountries to become net-zero haven’t changed.
The desire of investors to own the mostsustainable assets hasn’t slowed. But it’s becomemuch more difficult to undertake the changes
necessary.”

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CHAPTER 4

SECTORSTO WATCH“The rotation from traditional commercial
real estate to other parts of the built
environment is here to stay.”
UK fund manager

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Figure 4-1 Sector prospects in 2023

With historically high energy prices andthe prospect of shortages over winter, it isunsurprising that new energy infrastructure
tops the sector rankings in Emerging Trends
Europe for the second year in a row.

Generally good = above 3.5

Overall prospects
SectorRank

Investment
Score

Rank

SectorFair = 2.5 – 3.5

Development
Score

Rank

Sector

Generally poor = under 2.5

Rents
Score

Rank

SectorScore

1.

New energy infrastructure*

4.45

1.

New energy infrastructure*

4.50

1.

New energy infrastructure*

4.39

1.

Data centres

4.25

2.

Life sciences

4.35

2.

Life sciences

4.44

2.

Data centres

4.28

2.

New energy infrastructure*

4.25

3.

Data centres

4.15

3.

Data centres

4.38

3.

Life sciences

4.25

3.

Life sciences

4.20

4.

Social housing

4.13

4.

Self-storage facilities

4.24

4.

Social housing

4.13

4.

Industrial/warehouse

4.14

5.

Retirement/assisted living

4.12

5.

Retirement/assisted living

4.20

5.

Affordable housing

4.08

5.

Self-storage facilities

4.09

6.

Affordable housing

4.10

6.

Healthcare

4.16

6.

Healthcare

4.05

6.

Logistics facilities

4.04

7.

Self-storage facilities

4.10

7.

Logistics facilities

4.12

7.

Retirement/assisted living

4.04

7.

Private rented residential

3.98

8.

Logistics facilities

4.04

8.

Social housing

4.12

8.

Self-storage facilities

4.03

8.

Retirement/assisted living

3.94

9.

Co-living

4.04

9.

Affordable housing

4.12

9.

Industrial/warehouse

3.98

9.

Co-living

3.90

10.

Private rented residential

3.99

10.

Private rented residential

4.08

10.

Logistics facilities

3.96

10.

Leisure hotels

3.87

11.

Industrial/warehouse

3.98

11.

Student housing

4.03

11.

Private rented residential

3.90

11.

Healthcare

3.87

12.

Student housing

3.97

12.

Leisure hotels

4.02

12.

Student housing

3.90

12.

Student housing

3.83

More broadly, the energy crisis has reinforced the need notjust for countries to become more energy self-sufficient,but buildings too, which will advance the green agenda andmake them more resilient.

13.

Leisure hotels

3.90

13.

Co-living

4.01

13.

Co-living

3.83

13.

Affordable housing

3.82

14.

Serviced apartments

3.77

14.

Industrial/warehouse

3.98

14.

Leisure hotels

3.77

14.

Serviced apartments

3.75

15.

Parking

3.74

15.

Serviced apartments

3.83

15.

Serviced apartments

3.70

15.

Social housing

3.71

16.

Healthcare

3.72

16.

3.72

16.

Housebuilding for sale

3.60

16.

Housebuilding for sale

3.58

It is perhaps stretching the definition, but new energy
infrastructure could be taken to include existing assets. As
one private property company owner explains: “We haveto manage an energy turnaround. And it is my vision, mydream, that buildings will increasingly become small power
plants; that buildings generate the energy they consume
themselves and can also feed energy into the grid.”

17.

Housebuilding for sale

3.6

Flexible/serviced offices
and co-working

Leisure

3.53

3.58

3.67

17.

Flexible/serviced offices
and co-working

Flexible/serviced offices
and co-working

3.43

18.

Leisure17.

Leisure3.40

18.

Flexible/serviced offices
and co-working

3.50

19.

Leisure20.

It is a niche pursuit, attracting little capital comparedwith mainstream real estate, and it is unfamiliar to many
respondents. For some, investment in solar or wind power
facilities or battery storage is more the realm of pure
infrastructure investors than real estate players. But just as
the largest managers combine divisions to become “realassets” investors rather than differentiating the two, so thesurvey signals how these worlds are merging. And in fact,some interviewees confirm they have started investing inbattery storage as a real estate asset.

The top ranking of new energy infrastructure reflects thesector's role in one of the major challenges of our time - thetransition to green energy. But it is also part of the wider,longer-term trend in which investors rebalance holdings
away from the traditional big three sectors, particularly office
and retail, towards previously alternative assets that will
benefit from non-cyclical demand over the coming years.

17.
18.

Housebuilding for sale

3.60

18.

3.54

19.

Central city offices

3.43

19.

Central city offices

3.25

19.

Central city offices

3.47

Central city offices

3.34

20.

Retail parks

3.41

20.

Parking

3.10

20.

Retail parks

3.21

21.

Retail parks

3.17

21.

Parking

3.39

21.

Business hotels

2.96

21.

Parking

3.17

22.

Business hotels

3.13

22.

Business hotels

3.29

22.

Retail parks

2.93

22.

Business hotels

3.06

23.

Business parks

3.04

23.

Business parks

3.20

23.

Business parks

2.87

23.

Business parks

3.05

24.

High street shops

2.94

24.

High street shops

3.09

24.

High street shops

2.79

24.

High street shops

3.02

25.

City centre shopping centres

2.68

25.

City centre shopping centres

2.93

25.

Suburban offices

2.52

25.

City centre shopping centres

2.82

26.

Suburban offices

2.62

26.

2.72

26.

City centre shopping centres

2.43

26.

Suburban offices

2.77

27.

Out-of-town shopping
centres/retail destinations

2.49

Out-of-town shopping
centres/retail destinations

27.

2.25

27.

2.71

Out-of-town shopping
centres/retail destinations

2.62

Suburban offices

Out-of-town shopping
centres/retail destinations

27.

Source: Emerging Trends Europe survey 2023

* e.g. solar, wind, energy storage, electric transportation

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Note: Respondents scored sectors’ prospects on a scale of 1=very poor to 5=excellent, and the scoresfor each sector are averages; the overall rank is based on the average of the sector’s investment anddevelopment score. The survey also covered communication towers/fibre but the number of respondents
rating the prospects for this niche sector was too small for it to be included in the rankings.

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YOUNG EUROPEAN IN BRUSSELS, BELGIUM.

“The strong fundamentals that we identified sometime ago, will still be there,” one leading REIT
executive says. “For example, in Europe, you havea demographic impact on the number of asset
classes, like residential or healthcare, that will stillbe there in three to five years.”
Indeed, various forms of housing dominate the top
10 picks from survey respondents, with healthcare
in there too. Even student housing is benefiting fromrenewed positive sentiment in the rankings, moving
to 12th place from 15th last year, after uncertainty
about its prospects in the wake of COVID, withstudents now back on campus rather than learning
remotely.
On a broad level, this is an acceptance that thebalance between residential supply and demand inEuropean markets has not changed in the past year,
and it is unlikely to change any time soon.
While the security of income from residential isperhaps more certain than from commercial sectors
like offices, the leap in construction and labour costs
affects residential developers too, restricting supply
while demand remains high.
“The housing crisis hasn’t exactly gone away in most
European cities,” one global investment manager
says. “If anything, supply is a bit more constrained
and pricing is continuing to increase, and so rents
are increasing."
Retirement/senior living is the highest rated of theresidential sub-sectors for investment, up fromseventh place last year, and among the top 10
for development, driven by the growing needs ofan ageing population and the fact that COVID-19
showed a lot of older stock in the sector to be
obsolete.

And social housing, in fourth place this year
compared with 12th last year, has overtaken
affordable housing, which sits at seventh placeversus sixth last time. This requires some
explanation. Respondents have marked up theirinvestment and development prospects in recent
years, given robust demand and a perception ofsolid income, often from government-supported
rents. They also find favour among impact investing
funds.

The housing crisis hasn’t
exactly gone away in most
European cities.

But they face many headwinds in the current
economic environment. Of the prospect ofincreasing rents in sociable and affordable housing,one manager active in the field says: “I think it’sreally naive. If you follow the news, and you talk to
people, families can’t pay for the energy bill. I don’tknow what kind of rental increases you want to doagainst that background. Even if you can raise rents,
should you?”
There is also what one global investor calls “strokeof the pen risk”, given that governments can change
regulation overnight in sectors seen as politicallysensitive. The UK is considering capping rents in thesocial housing sector, for instance. “It should be thebiggest part of our portfolio in the next 20 years, but
it’s so political,” one global fund manager says.
Of the other alternatives at the top of the charts,
data centres, in third place, continue to see
increased demand for space. Some city andnational governments object to the heavy energy
consumption of data centres, signalling potentiallystronger political opposition in future.

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For the time being, however, industry players
are swayed by the investment rationale. “Datais one of these things that has been growing
exponentially, it will continue to do so, it’salmost always true to say there’s been moredata created in the last two years than in theentire history of mankind before that,” one REIT
manager says, “and that continues to fuel a lot ofdemand for data storage and processing.”

With the Gen Z, the millennials andemerging middle classes very much
focusing on new experiences, we arelooking at where these experiences comefrom — for example, travel and leisure.

Industrial owners are looking to convert shedspace to data centres, but interviewees say that,for now anyway, there are “finite” opportunities
because of the size and specialised nature of theassets.
Life science is another sector that is small but
growing fast, particularly in the UK, and rides
high in this year’s charts in second place.
“The dynamics in the true lab and office space
are astounding, beyond belief,” says one
specialist investor, referring to the need forcompanies to cluster in certain kinds of spacein certain locations, which currently are in very
limited supply.
But again, the sector is small, requires
specialisation, and, according to someinterviewees, caution too. “Life science issomething we’re spending time on, we just needto make sure it really is life science and not justan old medical building that’s now marketed aslife science,” an investment manager says. “But
if it’s the right kind of product, that’s definitely
something we’re interested in.”

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One value-add manager warns of persistentmarket concerns over venture capital funding
falling for life sciences companies and over thequality of covenants, arguing that there has been“far more hype for life sciences than there really
was demand to meet that hype.”
The outlook for hotels is bifurcated alongpredictable lines. Business travel is seen as
unlikely to recover soon, and therefore the hotels
that rely on business travellers will continue tosuffer and remain towards the bottom of thetable in 22nd place. By contrast, leisure travel
has rebounded strongly in the wake of pandemic
restrictions being lifted, releasing pent-up
demand and rank higher in 19th place. Yet someinterviewees are now waiting to see how thecost-of-living crisis will play out across Europe.
“People are under-exposed to lodging, and they
see a recovery,” one global investment manager
says. “But you have to question how long thatrecovery will last if people have to cut back on
spending.”
However, interviewees remain confident about
the prospects for leisure travel in the medium tolong term. “With the Gen Z, the millennials andemerging middle classes very much focusing on
new experiences, we are looking at where theseexperiences come from, for example, travel andleisure,” one global pension investor says. “That’s
an important area where this group will spendmoney. And where they spend money, we should
be investing.”

YOU ARE HEREREAL ESTATE CAPITAL MARKETS

Logistics has slipped down the overall rankingsfrom third to eighth place although still weighs inat seventh in terms of prospects for investment,
and sixth for rental growth. Interviewees believethat while rental growth might slow from thehistorically high levels seen in some markets— 40 percent in the UK in 2021, for instance —demand still outweighs supply in all but a few
markets – notably Madrid.

Consumer and retailer confidence that was
improving as COVID-19 receded has been hit by
the spike in inflation.
Although European retail rents tend to be indexlinked, the ability of owners to increase rents inline with inflation is far from guaranteed in a timeof economic weakness.

If there is a more downbeat view of the prospects
for the sector, it is on the investment side.
A sector that has seen yields compress tohistoric lows, sub 3 percent in many markets, isparticularly exposed when values fall.

And then there is office, which remains thelargest sector of traditional commercial property
in terms of extant assets, and one of the largest
sectors when it comes to European investment
volumes. But its prospects are no more certain
going into 2023 than they were last year.

“One brokerage has come out with a latest
valuation and over the last few months, they’ve
pushed their yield on prime logistics out by 75
basis points,” one European investment manager
says. “When that starts at three and a half andgoes to four and a quarter the implication onvalue is severe.”

The various subsections have slipped down the
rankings, with suburban offices in last position
for investment prospects compared with 24th(out of 27) last year, and second last for rental
prospects. The “hub and spoke” model of workers
in dispersed offices appears to get short shrift
from survey respondents.

For investors that use debt, a base rate andmargin which combined amount to 3.5 percent
or more means you cannot buy logistics assets
at 3.5 percent yields without essentially paying
more in interest than you make on income. Thatmeans such investors are out of the market,
reducing the weight of capital chasing the sector.

“If you think that the benefit of office working is

Retail occupies three of the four bottom places in
the 2023 ranking of sectors similar to last year,with only retail parks rising out of the basement,
partly due to the potential for them to become
part of the logistics network of retailers.

collaboration, then why would businesses havemultiple locations and give people the option ofgoing into multiple locations,” one investment
manager asks. “That doesn’t make any sense. It’sgoing to be central offices that can bring people
together. It makes the pitch for suburban offices a
lot harder.”If you think that the benefit of office working iscollaboration, then why would businesses havemultiple locations and give people the option ofgoing into multiple locations.

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YOU ARE HEREREAL ESTATE CAPITAL MARKETSWhen you feel that you’re
working in a great space, you
get that energy from it.
There is no consensus around where demandin a hybrid working world will settle. But there isconsensus among interviewees, even stronger
than last year, that the very best buildings
will command premium rents and prices, withincome and values falling away for the rest quite
sharply. Environmental, social and governancecredentials will form a major part of what defines
the best buildings in 2023.
It is a market that divides opinion, and that iswhere big money will be made and lost.
“When you feel that you’re working in a great
space, you get that energy from it. “ And there’s
more demand for that space than there is space
available,” one global investor says. “Whenpeople come into the office and it’s substandard
space, it’s actually worse than working fromhome. And I think that replacement costs are sohigh, even regardless of the land prices, that noone’s building anything. So, the actual supply/
demand dynamics for offices work, but it’s allabout stock selection.”

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Another global player explains the rationale
behind “a huge investment” in a grade-A, “supersustainable, amenity-rich”, city-centre officebuilding: “We may be wrong, but our feeling isthat at rent review in five years’ time, rents will go
up because there is no comparable product.”
On the flip side, others point out that the current
difficulty in refinancing loans is concentrated on
offices. This sector will see the most distress, and
it is already causing concern among lenders.
Not only will the loans fall due as values drop
and income cover ratios decline, the buildings
themselves will need significant capital
expenditure to render them fit for the future.
Where that capital comes from is an open
question.
“All the big changes and factors affecting
real estate — technology, demographics,
sustainability — they all collide in office,”
one global investor says. “The advance of
e-commerce caused a huge migration of value
from retail property owners to logistics. I think theshift in value from poor real estate to sustainable
real estate over the next decade or so could be
many, many multiples of that.”

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CHAPTER 5

FIT-FOR-PURPOSEREAL ESTATE“In the post-COVID environment, I see a
sense of place as absolutely essential tovalue creation, value retention, because
if you don’t enjoy going somewhere
physically, you’re not going to go there.”
Global investment manager

BATTERSEA POWER STATION CONVERSION TO RESIDENTIAL IN LONDON, UK

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FIT-FOR-PURPOSE REAL ESTATE

Figure 5-1 The industry’s view on the most attractive way to acquire prime assets

Caught up in a whirlwind of long-term
upheavals in demographics, climatechange, technology and lifestyles, realestate faces a major challenge to be fit
for purpose.

a wide range of uses that were economically
relevant for the past 30 or 40 years suddenly
get changed by a shift in technology or
demographics or some other exogenous factor.
And that typically makes a lot of real estateobsolete.”

It is a challenge that involves changing theuses to which real estate caters while building
in greater flexibility so it can remain useful overtime — not to mention a transformation of its
environmental sustainability and social impact.
Set against this need for change, the pandemic
and war in Europe have disrupted goods andenergy supplies to create highly inflationary
conditions, making real estate renewal much
more expensive to achieve.

The threat of obsolescence over the next
five years concerns nearly half of survey
respondents, even if other issues, notably
construction costs, are front-of-mind in
the shorter term. Moreover, environmental
sustainability, one of the key factors driving
obsolescence, is seen as a bigger immediateconcern. The implication is that while surging
construction costs are seen as a temporary
hurdle, it will be impossible for the industry tooverlook accelerating change in the demands ofoccupiers, the increasing influence of regulatorsand the climate agenda.

Yet the industry leaders canvassed for Emerging
Trends Europe are looking beyond the short-term
disruption to markets and regard climate change
as the most important challenge for real estateover the next 20 years.
One European investment manager speaks formany when he refers to the need for a “structural
reaction to climate change as a result of it
demonstrating the failings in our stock. We’re at
the beginning of climate change as a driver ofobsolescence, as a driver of capex, as a driverof complexity. ESG (environmental, social andgovernance), particularly the E element, hasgone from greenwashing to being absolutely
fundamental to investment success.”

Part of the reason why obsolescence itself does
not appear to be such a concern for 2023 may
be due to uncertainty about exactly when its
negative impact on values will start to bite. A
UK-based manager notes that the theme ofenvironmental obsolescence is partly driven by
investors and partly by policy: “In the residential
sector, for example, we are going to be unable
to lease some flats based on EPC (energy
performance certificate) thresholds in 2026, butparts of the market have yet to wake up to thatas a capex issue. There’s creeping policy-driven
obsolescence.”

Others emphasise the impact of technology. “We
are going through one of these great transitions
in our sector,” says one fund manager, “where

Retrofitting/repurposing an existing building is the most attractive way to acquire prime assets

Overall %
agree

62%
New build requirement is the most attractive way to acquire prime assets

43%
M&A is the most attractive way to acquire prime assets

27%
Strongly disagree

Disagree

Neither/nor

AgreeStrongly agree
Source: Emerging Trends Europe survey 2023

Figure 5-2 Observed/anticipated change in number of assets repurposed
Overall %increase

Proportion of assets repurposed from last year

54%
Proportion of assets expected to be repurposed in the next 5 years

78%
Decrease somewhat

Stay the same

Increase somewhat

Increase significantly

Source: Emerging Trends Europe survey 2023

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FIT-FOR-PURPOSE REAL ESTATEThe suggestion here is that there may still
be a degree of denial in some parts of theindustry. Interviewees acknowledge the failure ofvaluations to reflect sustainability-related capex
requirements, even though 81 percent of survey
respondents believe ESG credentials will havea material effect on asset valuations over the
next 12-18 months. According to a pan-European
manager, there is no sign yet of valuations forbrown, or energy inefficient, buildings decreasing,or at least not sufficiently. Another manager
laments the “lack of concrete guidance” ongreen premiums and brown discounts from thevaluation standards authorities.

Figure 5-3 The most common change when repurposing an asset in the last year

Residential

64%
18%

Mixed useFrom
office to ...

Logistics
LeisureRetail7%3%1%

Mixed use

33%
26%

Residential

Fromretail to ...

Despite the uncertainty around valuation, mostof the industry leaders interviewed for Emerging
Trends Europe have clearly signed up to the fitfor-purpose agenda and are making long-term
resources available to address it. “Most capex is toimprove the quality of the asset without changing
the use,” says a major investor, “transforming officegrade B to grade A, or grade A to net-zero. We
are not investing only to improve the sustainability
credentials of our assets but to improve theirperformance to extract value, which means better
rent and better yields.”

18%

Logistics

14%

Offices

LeisureOne large investor believes that poorer
sustainability is “not yet factored into thevaluation process” but adds: “We have seenthat investors are no longer keen to invest in asector, an asset or a fund without sustainability
credentials and especially net-zero credentials.
So, this is going to have an impact in the market
and will accelerate.”

5%

Source: Emerging Trends Europe survey 2023

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We’ve almost certainly got
too much office space,certainly too much of thewrong type of office space.
There is also an explicit recognition of how
technology is accelerating obsolescence. One
European manager notes that there is “a hugeobsolescence issue” with offices. “We’ve almost
certainly got too much office space, certainly too
much of the wrong type of office space. The realissue now is whether office is going to be moving
the same way as retail, in the sense that there’s afundamental change in the economic model.”And for offices’ transformation to work financially,
they will need to be in the right location. “Offices
will continue to attract a lot of capital,” opines apan-European manager. “But they have to be
the right offices, with the right layout, in the rightlocation. This flight to quality in offices is massive.
This is very much related with ESG because if
you’re not in the right location and your tenants
can’t support a higher rent, you’re not going to beable to make the necessary investments to takethat asset to the right level of energy efficiency,
wellness for the employees, or to change thelayout. And if not, there will be a lot of stranded
assets across Europe that no one will buy
because it’s just not economical to retrofit them.”

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FIT-FOR-PURPOSE REAL ESTATE

Another aspect of obsolescence relates to thewhole concept of placemaking. This could imply
a greater emphasis on buildings as part of an
attractive and stimulating environment, attracting
workers and residents alike. Some interviewees
suggest that the whole industry must focus
on creating the right kind of environment
for tenants to move into, given that it’s not
something individual players can achieve alone.
“Placemaking is more important than the building
itself,” says a pan-European manager, “andcreating the environment in which the tenants
can thrive—where people live, work and play—issuper-important.”
There is also a strong view that places need
to be more flexible to cope with more rapidlychanging occupational demands. This is reflectedin the emphasis on repurposing to mixed-use in
the survey responses but goes further than that.
One residential operator notes that assets thattarget specific groups necessitate a high level of
portfolio churn, whereas the objective should be
to satisfy people where they are. In other words,“we need to create places where your home andarea can evolve along with you. Digitisation cancontribute to that.”
Local government also has a crucial role to playin creating places that are fit for purpose. Withouta coherent vision it is difficult for the real estateindustry to understand which projects will bepermissible and how to meet the specific needsof the locality, whether developing from scratchor repurposing.

A developer-manager notes that “up to now,
you’ve had a lot of independent actors pushingfor pieces of cities. But when you can integratethat in a common view, it becomes much more
powerful and much more doable.”
Refurbishing or redeveloping existing stock
can either involve reconfiguration to meet thechanging needs of similar kinds of user or
a complete change of use – in other words
repurposing. As the survey makes clear, themotive here is not just about dealing with thethreat of obsolescence: nearly two-thirds of
respondents believe repurposing or retrofitting
an existing building is the most attractive way toacquire prime assets.
The survey shows that repurposing existing
stock from one sector to another is on an
upward trend, with 54 percent of respondents
repurposing more assets in their portfolio
compared to the previous year, a figure thatis up from 52 percent in the last survey.
Likewise, more than three-quarters expect tobe repurposing still more assets in five years’
time, again up from last year’s survey. Further
impetus has come in cities such as London andBrussels where the planning authorities insist
that developers fully explore the possibility ofretrofitting before permitting completely
new development.

Figure 5-4 The most common change expected when repurposing an asset overthe next three to five years

Residential

51%

38%

Mixed useFrom
office to ...

Logistics

4%

Leisure2%

Retail1%

Mixed useFromretail to ...

45%

Residential

22%

Logistics

20%

Offices

Leisure9%4%Source: Emerging Trends Europe survey 2023

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FIT-FOR-PURPOSE REAL ESTATEZURICH, SWITZERLAND

Last year, offices were most commonly
repurposed, and mainly to residential. For retail,the most frequent change was to mixed-use,with residential not far behind. These trends arelargely expected to continue over the next five
years, though with logistics taking a growing
share of retail space.
One French manager talks of repurposing “at anindustrial level”, adding: “We have a huge pipelineof residential coming from our office portfolio,
often offices in secondary locations from saleand lease-back deals we did in the past. Now,
those companies don’t need those assets andare vacating them.”
In Germany, office to mixed-use is also becoming
more common, according to a European fundmanager: “There’s an absolute necessity for
repurposing. We’ve seen a lot at a city or aproperty level, repurposing inner cities towards
more mixed-use facilities with a higher quality. In
our study of Germany alone, we found about 480
properties being transformed. The majority was
office to mixed-use.”
This may well be part of a more general trend
towards greater flexibility of use, both within
and across sectors, as seen, for instance, in the
moves towards more of a service-type offeringwith offices.
Some interviewees acknowledge that the paceof repurposing across Europe may falter during
current market conditions, in particular due toescalating construction costs.

One UK-based manager does sees this as
a bottleneck, but more for the short term andin combination with other cost constraints: “Atcurrent construction cost levels we will not
repurpose, but if they fall, then possibly. A lot of
older offices and business parks are screaming
to be converted to something else. But the land
values need to go down sufficiently so that it
makes economic sense to convert, and theplanning system needs to be supportive.”
When repurposing from office to residential
there is always the question of the relative
rental levels in the sectors, which may require
careful selection of locations. A global manager
says that “a big UK theme is repurposing theoffice buildings that were next to rail stations incommuter towns. You’re going to want offices
in a central place that’s easy to get to, vibrant,interesting and exciting, not in some random
town.”
Another consideration, according to someinterviewees, is the time involved to get permits
and the uncertainty surrounding that timing,
which can be an issue for the value-add funds
that may well be most interested in this activity.

There’s an absolute necessity
for repurposing. We’ve seen
a lot at a city or a property
level, repurposing inner cities
towards more mixed-use
facilities with a higher quality.
A global investment manager sums up thisshift in approach to real estate: “We’re doing
more repurposing within sectors, but so
dramatically that it’s unrecognisable. Intensive
office refurbishments are making it a different
kind of sector. Tenants are also doing stealthrepurposing within spaces. Retail park tenants
are doing logistics in the same units. Officetenants are transforming the way they use spacefrom a place where people sit and work to aplace where people collaborate and enjoy some
hospitality.”

Short-term constraints aside, the industry
believes that keeping real estate fit for purpose
will increasingly involve a blurring of theboundaries between traditional sectors orchanging patterns of activity within buildings that
may be considered to lie within the same sector.

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CITIES TO WATCH

CHAPTER 6

CITIESTO WATCH“You still need to be in the big, key dense cities
because those are the talent hubs. In a recession,
you tend to see vacancy go to the secondary
locations and the secondary quality stock.
And when there’s a lessening of demand,
people migrate to the best-quality
buildings in the best cities.”
Institutional investor

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With economic uncertainty afflicting
the whole of Europe, overall
investment and development
prospects for all 30 cities coveredby Emerging Trends Europe havedeteriorated since last year’s report.

For the second successive year, London remains
the most favoured city in Europe for its overall
prospects, especially for offices and logistics.
Retail and hospitality are also well supported by
the revival in tourism. Sentiment is buoyed by the
perennial attractions of a wide and deep market.

Where last year there was a unifying, panEuropean recovery from the economic
consequences of COVID-19, this year’s survey
and interviews reveal a much more fractured
response to highly challenging market conditions— and significant differences in the potential
resilience of the cities.

There are, however, also nuances in demandfor London’s office districts as working patternschange post pandemic. One global fundmanager observes that “if you don’t enjoy goingsomewhere physically, you’re not going to go
there. We see it dramatically in London, withthe return to work being most robust in theWest End, less robust in the City and weaker inCanary Wharf.”

Varying prospects for inflation between countries
relating to their dependency on fossil fuels forenergy, divergent interest rates and distancefrom the war in Ukraine all play their part. These
factors are impacting cities’ ongoing economic
performance and their forecasted real estate
returns, two of the top three considerations
influencing survey respondents when deciding
where to invest or develop.
In tandem with these influences, the disruption topatterns of life that accompanied the pandemic
has modified the function of cities and thedemands on real estate there. In this evolving
environment, national and international transport
connectivity is also seen as a key influence, andis particularly relevant for those cities that haverisen up the rankings this year, notably Paris,
Madrid, Lisbon and Copenhagen.

The depth of London’s investment market
reflects the extent of its broader metropolitanarea, something that is only rivalled in Europe by
Paris, which takes over second place from Berlin
this year.
The French capital’s strong transport links once
again find favour with industry leaders, but they
are also anticipating a boost from the 2024
Olympic Games. And importantly, France is seen
as having a relatively resilient energy supply,
mainly due to its nuclear generation, which
contributes to a lower carbon footprint for realestate operators.

Figure 6-1 Europe’s 10 most active markets, Q4 2021–Q3 2022 (€bn)

Country		

Q4 2020–Q3
2021

Q4 2021–Q3 %2022

Change1.

London

26

32

23%

2.

Berlin

16

30

86%

3.

Paris

20

22

8%

4.

Stockholm

10

12

22%

5.

Munich

8

8

-3%

6.

Madrid

4

6

49%

7.

Frankfurt

9

6

-35%

8.

Hamburg

5

6

20%

9.

Dublin5

6

13%

10. Milan

3

5

50%
Source: MSCI Real Assets

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Figure 6-2 City rankings - Overall prospects
Overall prospects
City

Rank (2022)

Score

1 (1)

London

2.15

2 (3)

Paris

1.72

3 (2)

Berlin

1.69

4 (6)

Madrid

1.54

5 (5)

Munich

1.49

6 (7)

Amsterdam

1.48

7 (4)

Frankfurt

1.30

8 (8)

Hamburg

1.19

9 (9)

Barcelona

1.12

10 (11)

Milan

1.10

11 (16)

Lisbon0.98

12 (12)

Vienna0.93

13 (13)Dublin0.92

14 (18)

Copenhagen

0.80

15 (10)Brussels

0.78

16 (15)

Warsaw

0.77

17 (14)

Zurich0.71

18 (20)Manchester

0.70

19 (19)Stockholm

0.68

20 (17)Luxembourg

0.63

21 (21)

Rome

0.62

22 (22)

Birmingham

0.48

23 (23)Athens0.47

24 (26)

Lyon

0.45

25 (24)

Helsinki

0.44

26 (27)

Edinburgh

0.42

27 (25)

Prague0.42

28 (29)

Budapest

0.31

29 (30)Istanbul

0.26

30 (28)

Oslo

0.24

Went up

Went down

No change

Note: Respondents who are familiar with the city scored the expectedchange for 2023 compared to 2022 on a scale of 1=decrease substantiallyto 5=increase substantially and the scores for each city are averages.
For more detail on city scores, see appendix.

“The quality of the city is improving; theslow traffic, bicycles, walkways, greenery,
the use of public space are all improving
it tremendously,” says a Dutch investor.
But like in London, offices need to be in
the right location in Paris. Another investor
suggests that “peripheral locations will
suffer because their offices have a DNA
that won’t work in the future — large officebuildings which are not centrally located.”
Berlin has slipped one place down the
rankings this year, and like most German
cities, has registered one of the larger
reductions in scores across Europe — no
doubt reflecting the country’s dependency
on Russian gas supplies and thepotential impact on inflation and the wider
economy.
But the city still attracts the enthusiasm ofmany market players, and stands out fromthe other German cities covered in thesurvey, with pricing viewed as relatively
competitive, and offices seen as lesslocation-sensitive than many other cities:“You can go out of the CBD. The market isreally broad, and the vacancy rate is stillat 3.5-3.7 percent right across the city, so
you can invest almost everywhere.”

As one of the fastest growing cities in
Europe, Madrid rises from sixth to fourth
place. Urbanisation is continuing apace,seemingly unhindered by the pandemic,
due to inward migration from elsewhere in
Spain and from overseas.
Spain is also set to benefit from strong
growth in wind and solar power over the
next few years, potentially insulating the
economy from energy disruption andhelping move real estate towards net-zero.
Residential investment in particular isviewed as promising given a perceived
shortage of supply. As one developernotes, prices are rising as a result of the
scarcity of ready-to-build or fully permitted
land: “The pricing dynamics for those thathave land and can build are good andwill remain good.” Similar supply-demand
dynamics are reinforcing the office andlogistics sectors here.
Although the German cities remain in
the top 10 there is not quite the sameunwavering positive sentiment as inprevious years. Frankfurt slips threeplaces to rank seventh in the survey, again
reflecting Germany’s vulnerable energy
position. Interviewees still see Frankfurt,
Munich and Hamburg as resilient in thelong term, but only accessible at a price.

Source: Emerging
Trends Europe
survey 2023

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One investor characterises Munich, at
fifth place, as “a mature market, which isalready expensive, so you cannot expect
head room to increase rents and value”.
Institutional investors appear to be limiting
their target allocations here, with one
noting that some may now even want to
reduce their exposure, “given the energy
crisis and the political environment” inGermany. Frankfurt has some relatively
new niche sectors such as data centres,
but even these may now be approachinginvestor saturation. Meanwhile in eighth
place, Hamburg is seen as “losing
importance as a port city” while proving“complicated” for residential investment.
Amsterdam remains highly attractive,rising one place to rank sixth, basedon its strong economy and a reputation
for liveability. The city has a history of
repurposing that has helped rebalance
the volumes of office and residential stock,with vacancy levels relatively low acrossthe board. The municipal government
also has an explicit commitment tosustainability via “doughnut economics”,
which aims to provide all citizens with theessentials of life without damaging theplanet – the first European city to do so.

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Ranked ninth, Barcelona shares many ofMadrid’s positive attributes, including similarly
rapid population growth. One international
developer-investor says that offices and logistics
are performing extremely well here but thatwhile residential demand is strong, builders facea challenging target of 30 percent subsidised
housing. “In certain locations that makes sense,
but in others that aren’t in the city centre, it
doesn’t.”
Milan is also regarded favourably, as reflected in
its ranking of 10th. An asset manager commends
the opportunities in a wide range of emerging
sectors there: “themes that we really like, likeleisure, living, and the senior economy.” At thetime of the survey Italy’s economy was growing
faster than Germany or France, although theoutlook for 2023 now appears less favourable
as political and economic risks start to show
through in rising government bond yields.
Lisbon stands out for rising most against lastyear’s position, from 16 to 11 in the survey. The
city seems to be bucking the trend in most othermarkets, with demand still strong internationally,
even if local capital may be receding. “Resi isthe market star at the moment, attracting buyers
from all over the world,” says a local player, and it
remains relatively easy to build across the city.

The war in Ukraine is clearly having a particularimpact on cities in Central and Eastern Europe.
Ranked highest among these at 12, Vienna has
seen an influx of new residents, with growth in
the number of single households. Ranked 16,
Warsaw is seen as benefitting from increased
residential demand in the short term although
the proximity to the conflict is spooking many
investors. The volatility of costs from sitting
outside the Eurozone is also moderating
sentiment towards an otherwise resilient Polisheconomy.
Prague and Budapest remain low in the rankings,
27 and 28 respectively, largely due to their limited
liquidity. However, international players praise theformer for its strong rental growth prospects anda great sense of place, while the latter benefits
from a more favourable energy situation thanmost in Europe due to Hungary’s positive stancetowards Russia.
Two European cities benefit from specifictax advantages or political status. Ireland’scommitment to the lowest corporate taxes in the
EU undoubtedly supports Dublin’s ranking at 13.
And as a local fund manager points out, “after
Brexit, there is added demand from occupiersof logistics units because they are trying to
avoid the UK”. Luxembourg, meanwhile, slips
down three places to 20, with one international
manager pointing out that the EU is looking tocurb its tax-haven status.

Figure 6-3 Importance when selecting a city for investment or development
Overall %important

Transport connectivity (international, national and local)

95%
City’s economic performance

94%
Forecasted real estate returns

93%
Market size and liquidity

91%
Availability of assets/opportunities for new development

89%
Regulatory environment

85%
Attractiveness to talent

85%
Local active and smart transport connectivity

82%
Digital connectivity

81%
Housing affordability

67%
Overall city leadership

66%
Affordability of space for new/small/growing businesses

61%
Not at all important

Neither important nor unimportant

Somewhat important

Very important

Source: Emerging Trends Europe survey 2023

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Among the Nordic capitals, Copenhagen stands
out as potentially the most resilient in current
conditions, its attractiveness score having fallen
less than most. Climbing four places to 14, thecity is seen as low risk with low interest rates
and a growing number of international investors
adding liquidity in recent years, taking advantage
of a currency pegged to the euro. In the context
of the incipient energy crisis, Denmark’s capital isless gas-dependent than Stockholm and Oslo.

14

At 19, Stockholm is seen as having a verystrong residential market, but one that may
have become overpriced. Helsinki’s closenessto Russia counts against it in the short term
although one Nordic developer-manager
believes the city, ranked 25, is “underrated froman investor point of view”, given its strength
in technology and renewable energy usage.
At 30, Oslo is the lowest ranked city although
it is largely off the radar for most international
investors given the dominance of local players,
while the Norwegian economy’s dependence on
oil and gas is viewed increasingly negatively.
Brussels falls five places to 15, more than any
other city, with interviewees noting a substantial
loss of confidence among developers in thecurrent inflationary conditions, while politicalinstability is contributing to a lengthening
planning process.

Up 4placesCopenhagen
Copenhagen stands out as potentially the mostresilient in current conditions, climbing four places
to 14. The city is seen as low risk with low interest
rates and a growing number of international investors.

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Zurich’s position is also down, from 14 to 17.
One reason may be that external investment is
becoming more expensive as the Swiss franc
appreciates, a trend the government may beloath to discourage due to its dampening effecton inflation. Interviewees nonetheless notestrong transport links, a thriving hinterland and awell-diversified economic structure.
Among the provincial UK markets covered in thesurvey, Manchester ranks highest at 18, and ispraised for its strong local governance, which
has allied with good housing provision to support
the city economy. One UK investor observes that
Manchester is “notably different from London interms of willingness for employees and offices
to return to the city”. A similar phenomenon
is noted for Birmingham although the city isranked lower, at 22, possibly due to its closenessto London and somewhat less international
outlook. Edinburgh is lower still, at 26, with somesuggestion that the political rhetoric around
Scottish independence could lead to instability inthe longer term.
Although Rome is relatively lowly ranked at
21, some regard it as undervalued, with an
improving environment and housing market. This
is not only a combination of “how many people
are likely to live there 10 years from now”, one
European developer says, “but also a matter of
how the environment there is changing, whichshould attract talent for creating start-ups”. Officeprospects are also viewed positively, albeit off a
relatively low base.

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LISBON, PORTUGALFINANCIAL DISTRICT OF MADRID, SPAIN

LYON, FRANCE

Things are goingto get worse before
they get better.
Lyon, meanwhile, rises two places to 24. A
French-based international investor sees thecity as “resilient, with a strong GDP trend,
but it’s a relatively small market, with limited
liquidity” .
Despite its ranking at 23 and the relatively
small size of its investment market, Athens
is well regarded by some interviewees for
its rental and capital value prospects. A
regional fund manager comments that“there’s still an under supply of prime stock
because of the very protracted recession.
Over the last 10 years there have been somedevelopments in prime offices and retail, butopportunities are still there.” This contrasts
with Istanbul, 29, where the same manager
believes that “things are going to get worse
before they get better” , adding: “You’re talking
about triple-digit inflation, even though theeconomy keeps growing” .

4

11

Up 2
placesLisbonMadridPREVIOUS

Up 5
placesCONTENTS

NEXT

24

Up 2
places

Lyon

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20 YEARS OF EMERGING TRENDS EUROPE

CHAPTER 7

20 YEARS OF
EMERGING
TRENDS EUROPE“In the old days, we did property, we owned property.
We were remote from the real world as owners.
I cannot believe how myopic we were. It wasincredible, really, when you look back on it.”
Pan-European investor

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20 years of Emerging Trends Europe

20 YEARS OF EMERGING TRENDS EUROPE

2006

2010

2014

2018

2022

A vocal minority of investors
warn of a market bubble that
may soon burst. “We’re having
to take on more and more risk
for less and less return,”says one.

Europe’s economic recovery is
weak and consumer spending
restrained. Tenants want rent
reductions; negotiations withbankers are “mentally gruelling.”
The key question, one investor
asks: “Will there be tenantdefaults?”

As competition for prime assets
intensifies, investors seek
stable income from student
housing, data centres and otheralternatives. Green buildings,
too, are seen now as part of “aconsolidation of quality”.

Technology becomesincreasingly important tologistics’ enduring success aswell as the rise of co-working
and “space as a service”. Says
one interviewee: “Collaboration
between tenant and landlord will
be more and more crucial.”

The industry adapts as
the pandemic accelerates
digitalisation, dispersed working
and online shopping, while
hugely reinforcing the ESG
agenda and highlighting the needfor greater emphasis on customer
service, brand and reputation.

2004

2008

2012

“We are building as we havedone for the past 30 years,”
says one interviewee, “without
questioning if this meets therequirements of a changing
society.”

Battered by the US subprime
crisis, “fear is back” forEurope’s property players.
Says one: “Consumers are
fine, tenants are fine, thecountries are fine — themissing link is debt.”

The industry laments renewed
liquidity issues, a gloomy
economic outlook and possible
breakup of the Eurozone.
“Equity will not enter at current
prices, yields and expected
return,” says one investor.

2016

2020

Industry players look beyond
rent collection and consider
property as a service: “Twenty
years ago, we had tenants,
now we have customers,” says
one. “In 20 years’ time we’ll
have guests.”

Property continues tooutperform other asset classes,
but there is caution given thedarkening macroeconomic
outlook. “Occupier decisions
are taking a little longer thanthey were last year,” says one
interviewee.

2007

2011

2015

2019

Property is expected tooutperform other asset
classes in 2007 but says one
interviewee: “If 12 o’clock is
the top of the cycle, we are atfive minutes to 12.”In “austerity Europe”, thelending market remains
tough and the challenge
lies in managing risk. “We
need leaders with strategies,
not acquisition teams withtoo much money,” says one
interviewee.

Investors are veering between
core and opportunistic assets,
as reflected in the survey’s top
five cities: German stalwarts
Berlin and Hamburg alongside
the recovery plays of Dublin,
Madrid and Athens.

Core asset values are atrecord levels and in thislate-cycle market industry
players are starting to cherish“sustainable cash-flows” —increasingly from residential
and alternatives — and adopt“develop-to-core” strategies.

2005

2009

2013

2017

2021

“Everyone is looking forincome,” says one interviewee
as investors shift into multiple
sectors, even niches like carparks and self-storage. At thesame time: “The high street isdying.”The global financial crisishas been “devastating” forEurope’s property industry. “I
would put it alongside the fallof Rome — though this time
the barbarians were alreadyinside the gates.”

After a five-year “Darwinianstruggle”, optimism returns.
Global capital starts flowing
into core property via the big
investment managers whilesome specialists seek valueadd opportunities from banks
ﬂipping distressed assets.

Populism — especially
Brexit — weighs heavily
on real estate. Returns are
scaled down and active asset
management talked up. In
this risk-off climate, Germany
is regarded as a haven for
capital.

COVID-19 led to sharp recession
in 2020 and the prospect of afragile economic recovery in
2021. “Everything that was being
disrupted is being disrupted ata much faster pace,” says aninvestment manager.

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20 YEARS OF EMERGING TRENDS EUROPE

The industry reflects and looks forward
Emerging Trends Europe 2023 is the20th edition of this annual report,
which over the years has reflected
profound changes in the way
European real estate is used, financed,
traded, developed and managed.
To mark this anniversary, ULI and PwC havegathered some of the senior leaders who havewitnessed these changes first-hand, as well asa younger generation of professionals who will
be steering the real estate companies of the
future. What follows are reflections on the key
trends that have shaped the industry to date, andinformed views on the trends that may emerge
and define it over the coming 20 years.
Taking on board these insights while reviewing
the back catalogue of Emerging Trends Europe,
it is evident just how much real estate companies
are changing the way they operate, “and way
faster than anyone anticipated”.
In the interviews for the 2004 report, no-one
referred to megatrends. Yet over the course of 20
years, urbanisation, technological, demographic
and climate change have come to dominate
the narrative. Within a few years, the reportingof biodiversity footprints and targets is widely
predicted to achieve the same level of scrutiny as
climate resilience and carbon emissions today.

MORNING COMMUTE IN CANARY WHARF, LONDON, UK

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Yet those early editions of the report revealed
how data was starting to revolutionise theindustry through greater transparency, educatinga wider audience of investors of the nuances
between different sectors.
The use of such information, combined withprolonged low inflation and interest rates, led to a
“Big Bang” in the investable universe and a fastmaturing, cross-border investment market. And
alternative real estate, such as hotels, healthcare
and student accommodation — downplayed
as “quirky” assets as recently as 2007 — havebecome opportunities to invest through the ups
and downs of economic cycles and serve a morediverse range of risk and return appetites.
The global financial crisis (GFC) changed theindustry’s direction yet again. The banks pulled
back, and if they lent at all it was at modest loanto-value ratios, a conservative approach that has
not altered since. A new generation of lenders,in the form of non-listed debt funds, set up shop
to serve the market with gearing across different
slices of the capital stack. The alternative lenders
will continue to innovate and influence thefinance market.
Another legacy of the GFC was that capital
allocation based on the expectation of yieldcompression, with no other value creation
besides, looks anachronistic at best, risky at
worst.

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As interviewees look to the future, many see that arange of pressures — from the changing needs ofoccupiers, macroeconomic volatility, sustainability,
technology — will radically alter the process ofcreating returns from bricks and mortar.
Real estate is transforming into a service industry
as occupiers become customers with a rangeof needs and desires. Property companies, as
the following pages explain, will be required to
become more operational in nature, and broaden
skill sets, to stay relevant.
Global capital markets will also reflect the riseof digital-savvy investors who will become adominant voice as they seek to balance theirlong-term wealth against their impact on people
and the planet. This is what interviewees define
as “responsible capitalism” and will be part ofa property company’s DNA in the context of aworld beset by inequality, housing crises anda desperate need for social infrastructure andresilient cities.
When it comes to the factors determining
success in the next two decades, 94 percent
of respondents to this year’s survey stressthe importance of running a socially andenvironmentally responsible business. The climate
crisis will drive this further. It is one trend that has
only gained in prominence and relevance acrossEmerging Trends Europe’s 20-year history, uniting
the past, present and future. Developing green
buildings has grown from a side-line exercise
promoted by the faithful few who felt — in theabsence of proof — that they would eventually
yield the most value, to an issue that no property
company can now afford to ignore.

Today, the environmental impact of real estateis acknowledged by everyone, but a daunting,
20-year challenge nonetheless lies ahead forthe industry. Putting this task at the heart ofreal estate businesses — providing carbonneutral buildings, tackling embodied carbon
and creating resilient places that make urban
living more habitable and sustainable — is not
simply a matter of corporate survival, it is a moral
imperative.
Such work will require a collaborative effort ona scale never before seen. As one interviewee,
envisaging the real estate industry of the future,says: “I hope that we finally have stopped building
for eternity, and that we eventually start building
with modules so that we don’t have to tear down
entire buildings and start again” .
The extent to which acting in the interests ofthese wider concerns will dovetail neatly with pureeconomic benefit remains to be seen. But many
hold the view that the best way to predict the
future is to create it.

I hope that we finally have stopped
building for eternity, and that weeventually start building with modules
so that we don’t have to tear down
entire buildings and start again.

Figure 7-1 Factors that have had the biggest impact on the real estate industry
over the past 20 years
Low interest rates/QE

76%

17%

4% 4%

Impact of the global
financial crisis (2007/2008)

6% 6%

25%

64%

Urbanisation/densification

4% 7%

26%

63%

Use of technology

3% 4%

30%

63%

Rise of ESG

3% 7%

Wider ESG focus

3% 8%

36%

53%

Climate focus

3% 7%

37%

53%

Impact of ecommerce

5%

Impact of COVID-19
pandemic

2% 6%

Attractivenessto talent

3% 9%

42%

46%

Rise of alternate real estate

4% 12%

39%

46%

New business models

5% 10%

48%

38%

Increased focus on
the tenant

5% 11%

47%

37%

Real estate as a service

5%

Dispersed workforce

3% 11%“Hotelisation” of real estate8%

Not applicable

56%

35%

50%

31%

14%

50%

43%

17%

37%

42%

37%

49%
24%

No impact

26%

41%
Some impact

Significant impact

Source: Emerging Trends Europe survey 2023

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Capital markets
Over the last 20 years, real estate
has emerged from the shadows andmetamorphosed from an opaqueindustry to one that is integral to thefinancial markets.
A crucial starting point for this elevated status
came in the early 2000s, when the availabilityof new indices gave investors a way tobenchmark and track performance. MSCI (thenIPD) established the first indices to measure
the performance of institutional real estate.
Launched in the UK in 2000, and then acrossEurope, it provided insight into the performanceof assets in listed and unlisted portfolios.
By 2004, real estate was proving its worth.
Emerging Trends Europe reported thatan “abysmal three years of equity market
performance” had sent investors to the asset
class armed with the data showing direct
property returns had beaten those of all
major European stock markets. By 2005, “anoverabundance of capital” sent core investors
climbing up the risk curve to obtain assets.
At the same time, investors wanted to diversify
their portfolios since many still only invested indirect real estate in their home markets. Those
who had ventured into new territory in the 1970s
and 1980s had found to their cost that it was noteasy to invest directly cross border without local
knowledge or an experienced team on the ground.

This led to the evolution of indirect and unlisted
market with the launch of EPRA in 1999 and
INREV in 2003, which aimed to increasetransparency, professionalism, best practice andknowledge sharing.
The increasing professionalisation has
allowed investors to view property as a “supersophisticated market”. Today it is a fully-fledged,
dependable asset class, providing institutional
investors with an attractive risk-adjusted
performance, diversification potential, stable
income returns and inflation protection acrossthe non-listed and listed sectors. “Real estate has
shown it has much to deliver and has delivered,particularly since COVID, and especially foodanchored retail, logistics and core residential.
There are fewer surprises now,” reflects one
industry player.
Real estate investment now offers myriad
options for the investor. Partly this is down tospecialisation within the capital stack. At one
time, returns could be accessed from equity
investment, while banks issued the debt. Now
institutional investors are able to access returns
through equity or debt. They can gain exposure
to different levels of risk via core non-listed funds
and, at the same time, aim for higher returns,
perhaps through vehicles offering mezzanine
finance, or low-risk debt via the corporate bondmarket.

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Investors can also structure their investments
in a variety of ways: through joint ventures,
separate account mandates or partnerships andplace capital for the long or short term.
Non-listed funds have led to ever-larger realestate vehicles, managing amounts of capitalin the multi-billions. New niche sectors — suchas healthcare, life sciences and data centres— have risen in prominence and importance inrecent years, as reflected in Emerging Trends
Europe’s sector rankings.
With this growth has come greater transparency
as well as an increasingly global and diverse
investment base, exerting a huge influence on
what property companies do, not least in theirintegration of ESG issues in strategic decisions.
Since the GFC, the European listed realestate market has grown from €174 billion to€441 billion, according to Cohen and Steers,
underpinned by increasing allocations frominstitutional investors.
Meanwhile the European non-listed real estate
funds universe has expanded — from just 45
vehicles representing €16.9 billion of net asset
value in 2001 to 536 vehicles representing €362
billion in 2022, according to INREV.
Industry leaders are confident that capital for realestate companies will continue to flow. Global
assets under management (AUM) grew from $31
trillion in 2003 to more than $112 trillion in 2021.
And in 2021, AUM grew at 12 percent — well
above the annual average of 7 percent.

Figure 7-2 Availability of equity and debt 2003-23

Source: Emerging Trends Europe survey 2023

Since 2015, debt has been trending down, with equity following a similar yet less consistent path.
Debt has been less available than equity throughout.
Based on a scale of 1-10, 1 being the least available

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8
7
6
5
4
3
2
1
0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Availability of equity

Institutional investors will hunt for scale for theseincreased allocations, as property companies
become more operational to make inroads
into new sectors where specialisation andmanagement skills are imperative.
Increasing allocations to property will therefore
drive a continuation of the high-profile corporate
merger and acquisition activity and the trading oflarge platforms and portfolios that have featured
in the market lately.

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2014

2015

2017

2018

2019

2020

2021

2022

2023

Availability of debt

Financing innovation
In the years leading up to the GFC, investors
were too often consumed with how they could
use leverage to deliver better returns, and on the
tax efficiency of the vehicle.
With the GFC came the painful lesson that while
the financial structure of a property investment isimportant, it should be secondary to the strengthof the underlying tenant and the quality of thebricks and mortar.

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2016

One consequence of this shift in mindset is theinvestors’ new attitude to development. Before
the GFC, development was seen as too risky
and thus, every asset was bought turnkey; somefund structures, such as the Netherlands’ FBI,for example, prohibited development altogether.
Today, investors want to be involved as early as
possible to influence the end product – develop
to core – as one way of reducing risk.

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The GFC led to other radical changes tothe capital markets. As stricter regulations
disincentivised the banks, property lost some
big names as their first port of call for capital,
including Eurohypo, Hypo Real Estate and RoyalBank of Scotland. “Debt has vanished,” reported
Emerging Trends Europe in 2009. Into the void
came a new breed of alternative lenders aswell as well-capitalised German banks and US
investment banks. The overarching philosophy
revolved around relationship lending and moreconservative loan-to-value (LTV) ratios.
This approach to lending has not changed sincethen, and no one anticipates that it will. Nor does
anyone expect a return to indefinite growth, withleverage driving heady asset values.
Indeed, the challenge for lenders of all shapes
and sizes in the next few years will be theaffordability of finance in a rising interest rateenvironment. In these conditions, the big banks
will remain conservative, largely absent inanything other than the senior loan market.
Longer term, debt funds and other alternative
lenders are expected to grow their share oflending as real estate credit allows institutional
investors to benefit from attractive spreads andrisk-adjusted returns — in effect, accessing
property without having to change underlying
strategies.
There is a widespread view among the industry
leaders canvassed for this report that the debt
funds have enabled property companies tomanage capital requirements more efficiently.

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Moreover, they will provide the innovation
required in real estate finance and, as someinterviewees believe, adopt a more prominentrole around the “manage-to-green” retrofit
challenge.
“This has been a big story for real estate,” says
one interviewee. “The industry has a diversity ofcapital now. The debt funds are easy to deal with,faster, more aggressive and it’s been healthy forthe market because these are the lenders thatwill help drive change and innovation. Banks,
which are slow to evolve, will follow their lead.”

Disrupting capital flows
In 2008, Emerging Trends Europe observedthat the globalisation of real estate continued
apace. Opportunistic money was heading east
“where the markets are lively and yields chunky”.
Interviewees had “joined in the gold rush”
and cross-border investment in Europe would
become a normal function of the market.
The free movement of real estate capital has
been interrupted by several epic shocks overthe past decade. In 2012, Emerging Trends
Europe reported that economists were becoming
increasingly concerned that a break-up of theEurozone was likely. Four years later Brexit would
shock the markets. More recently, Asian investors
stopped buying European assets post pandemic
because travel restrictions meant they could
not physically view the property. Today, political
populism and geopolitical strife are thedisruptive forces.

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All of this turbulence will inform how global
capital is deployed in the future. Investment
will become more thematic, shifting away fromstrategies based upon cities, countries
or regions.
At the top of interviewees’ list of disruptive forces
influencing future portfolio construction are theknown unknowns — more pandemics — but
also the rise of China. “In 30 years’ time the vast
majority of the global middle class will be in
China, not in the West. That will require a hugerebalancing of the global economy,” says one.
Another describes the prevailing US and China
rivalry as “just one part of a new kind of world,which will move capital markets around withaccelerated sub cycles” . Others see the growing
influence of China impacting the way European
cities are designed, catering for Chinese
consumer preferences.
The industry sees the wider capital markets
becoming desynchronised, leading to greater
variations in performance of equity and bondmarkets across countries. But synchronicity
will persist in other ways. Interviewees reportthat technology — for instance, e-commerce inretail — means there is now greater internationalalignment in sectors. One interviewee reflects:“We are now marketing to specific audiences, notcountries and cities, and this is especially true inleisure.”Another says of consumer trends: “Expectations
have globalised, there is a more coherent
audience.”
Even then, some argue there will be layersof complexity as real estate companies willneed to balance these consumer trends withlocally focused concerns. Over the past 20
years, one interviewee says, globalisation has
led to the convergence of office occupational
trends, for instance. “But looking forward, withthe developments that you see now, that could
be going into reverse. If you have to become
more regionally minded, that also has an impact
on our industry. And there’s the whole climate
impact, which is actually one of the reasons forthat change. If you have to find resources more
locally and source energy more locally that will
impact the organisation of our cities in a way
that’s different to the whole globalisation andorganisation that we have [currently].”

We are now marketing to
specific audiences, notcountries and cities, and thisis especially true in leisure.

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Figure 7-3 Expected catalysts of change inreal estate over the coming 20 years

On the path to net zero

The ESG agenda

54%
Environment and sustainability
strategies are key priorities for mostindustry leaders for 2023 — as they
have been for some time — andclimate risk is widely acknowledged
as the biggest challenge facing realestate over the next 20 years. Yet it
has been something of an effort to
get to this point.
As recently as 2007, Emerging Trends Europe
noted that when property professionals weresurveyed about European sustainability
legislation “a significant proportion knew
little and cared less about the issue” . Greenbuildings were dismissed as a “marketing gag”.
A senior fund manager remembers thosedays well and recalls suggesting to his bossthat they should start taking sustainability into
account in their investment decisions. The
response was hardly encouraging: “All right, aslong as you don’t go around hugging trees, andsome of this is about investment returns.”
The industry was already monitoring
performance through the likes of BREEAM and
LEED. Though important in making buildings
more environmentally friendly some argue thatsuch benchmarking led to an obsession with
box-ticking, green labels.

But by 2008, the winds of change were blowing
and environmental issues had “moved sharply
up the agenda”, according to Emerging Trends
Europe. In that year a developer of sustainablebuildings recalls meeting US politician Al Gore,
who was promoting his documentary aboutclimate change, An Inconvenient Truth.
It was a personal turning point, he says, which
took place at the moment when the issue“went mainstream”.
The global financial crisis (GFC) did little toderail the agenda, despite speculation that“mean not green” might prevail. By 2015
Emerging Trends Europe stated: “Sustainability
is no longer an emerging trend: it has becomea fact of real estate life.” Today, an ESG
professional charts the industry’s journey: “Ina 20-year time-frame, we went from CSR, to
ESG, to climate adaptation and resilience.”
Some interviewees believe it is too early for
self-congratulation, however. As one urban
strategist says: “If you look at how a lot of ESG
funds affect the environment, there’s not evena correlation. It’s just hype.”
At the same time, macro-economic headwinds
threaten to obscure the climate crisis, at least
temporarily. “Even state development banks inthe Eurozone are making very opaquestatements as to whether their duty is to invest
in either fossil fuels or in the energy transition,”
one economist points out. “The same thing
goes for some of the largest asset managers
in the world, which are saying that they have afiduciary duty. Yes, they have ESG, but now, it’s
about energy security.”
As with the effect of the GFC, that will be
merely a bump in the road towards greater
sustainability, according to one developer:“The European Green Deal is happening andthere’s no turning back on that anymore evenwith the Russian intervention now. The trend iscompletely clear where it’s going.”

Climate change

42%
Changing customer demands

35%
Technological innovation

34%
Decarbonisation

29%
Real estate as a service

22%

Decarbonising real estate
It is now incontrovertible that the climate crisis
will have a profound impact on the industry
over the next 20 years. Real estate veteransspecially convened for this report conclude that“the refurbishment of existing buildings is thegreatest challenge the industry faces and will
impact values”. Likewise, a ULI Young Leaderspanel expects “huge pressure for change”,
given that the built environment produces
around 40 percent of carbon emissions.

Digitisation, robotics

21%
Geopolitics

21%
War for talent

16%
Deglobalisation and supply chain resilience

13%
Global migration driven by climate change
and refugee crisis

11%
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Source: Emerging Trends Europe survey 2023

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BOSCO VERTICALE IN MILAN, ITALY“In Europe, there are €200 billion of non-ESG
compliant assets that cannot find a single bid,”
claims a venture capital investor, adding thatlower rents, higher cost of finance and higher cap
rates could combine to produce a discount of 50
percent or more for low-rated buildings.
To meet the EU’s climate objectives, realestate will need to achieve a 60 percent cut ingreenhouse gas emissions by 2030 and fully
decarbonise by 2050. As one senior investment
manager points out, keeping pace with thosetargets is “the most material change the realestate industry can experience” because just 1.5
to 2 percent of the built environment isrenovated annually.
While many new buildings demonstrate
impressive environmental credentials, thechallenge is broadening from emissions
reduction in use to minimising embodied carbon,
so the coming decades will see the industry
forced to break the cycle of demolition andrebuilding. Today, governments already question
the wisdom of new concrete and steel buildings— a difficult question for the industry that will notdissipate.
Interviewees see policy increasingly directing
developers to repurpose. “It’s going to get harderand harder and less and less appropriate to
knock down buildings, so people are going to belooking at reusing what is already there,” says
a REIT CEO. “But also, new buildings will be
constructed so that they are flexible and theiruse can change. And, if they are dismantled, thematerials can be reused.”

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Greening the existing stock will require vast
capital expenditure and will need to happen
swiftly to meet climate goals.
Regulatory authorities will play a vital role in thatprocess: “Creating benefits out of environmental
policy must fall to regulation and governments tocreate standards. Then the private sector’s role isto optimise performance within those standards.”
Public authorities will also increasingly resort totaxes and incentives to achieve decarbonisation:“Most economists would say that a carbon tax is
actually probably the most efficient way to fightclimate change, because it’s classical economics
and you’re incentivising behaviour,” says one
economist.
Though property professionals desperately wantclarity in the “alphabet soup” of guidelines around
ESG, they are starting to recognise the value of
regulation here, which as one of the ULI’s Young
Leaders argues, “has a huge positive note to it
which we might not appreciate enough yet” . But
to stay on top of regulation, investors will need togo far beyond what is required.
Renovating existing stock will present a practicalchallenge because many buildings designed andconstructed over the past 30 years are of a low
standard, argues an architect: “We are stuck witha legacy of poor and expeditious decisions madearound cost, as opposed to around quality andlongevity. There is a big lesson there for how wedesign and build in the future. We have got tolook at what we can reuse, and then if we haveto rebuild, we must do it so that we don’t have thesame problem again 40 years from now.”

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Technology embedded within smart buildings willcontrol how they interact with the environment,
playing a crucial role in supporting the sector’s
journey toward sustainability, says the COO of a
global asset manager: “The building will be richin data, rich in insight about itself, and it will selfheal, it will self-manage energy, waste, water, todeliver much more optimal ESG outcomes.”
Where development is unavoidable, naturally
grown building materials can minimiseemissions, argues a green proptech
entrepreneur. “Whether it is timber, crosslaminated timber, or hemp-based materials like
hempcrete, they provide an amazing opportunity
to build in a more efficient way.” They do present
challenges, however, as one ESG consultant
warns: “Everyone is going to be looking at thefire qualities and the insurance implications.”
Not only will real estate need to minimiseemissions over the coming decades, it mustalso adapt to the effects of global warming thatare already being felt, and which will inevitably
worsen. “Water, heat and questions of resilienceneed to be at the heart of the conversation. They
speak to what the new commercial models of the
future are going to be,” says a futurologist.
One architect believes the urban fabric will needto adapt: “It’s going to change cities a lot, not justaround clean energy, but also the permeablesurfaces we create, the way we deal with water
as a valuable asset, and the way our streets areovershadowed, which is regarded as a goodthing in more extreme climates like India, or the
Middle East.”“The best adaptation is relocation. You shouldn’t
be making 50-year investments in places that
only have 10 years left to survive,” advises a
US-based climate analyst. “Europe certainly
has a more sustainable trajectory than much of
the United States. Even with a large population,
there’s still plenty of liveable geography. But
climate impacts will nonetheless exert an evergreater influence on how locations are assessedand on individual property values.”
With that in mind, climate modelling, whichshows how assets will perform against extreme
weather events at points in the future, is starting
to be taken seriously by the major property
players. Many institutional managers alreadyincorporate physical risk in their due diligenceand portfolio assessment albeit there is little
consistency of approach or measurement. Once
there is alignment across the industry, climate
modelling is set to become an integral part of thevaluation process over the coming years.
Yet at the same time that climate change isaccelerating and most negatively impacting thepeople of the southern hemisphere, the northernhemisphere, which is more liveable and resilient
to climate effects, is aging and depopulating,according to this analyst. “If we simply allow
supply to meet demand, we will alleviate labour
shortages, replenish our populations in liveable
geographies, and also reinforce or buttressour property markets. Demographics andclimate change are truly foundational for our
understanding of the future of real estate
asset prices.”Though climate risk remains at the heart of ESG
programmes, biodiversity is also coming to thefore as a consideration. The World Economic
Forum estimates that transitioning global
infrastructure and the built environment towards
nature-positive designs could generate over $3
trillion in additional annual revenues and create
117 million new jobs by 2030.
Already cutting-edge developers are monitoring
biodiversity within their projects with the aimof creating more diverse, balanced and selfsustaining ecosystems.
As one entrepreneur explains, the work here
involves the creation of communities based on
the “concept of regenerative resiliency,” of cleanwater, renewable energy, high-yield organic foodproduction, and waste resource management,
connected to Passivhaus home-building
principles. The same approach can be applied to
the retrofitting of existing urban landscapes.
It is possible to capture water, harvest a certain
amount of food and create green spaces that
can influence microclimates. Owners can thenassess their existing portfolios and identify
opportunities for rooftop, balcony or atrium
greenhouses, as well as energy generation.
As this entrepreneur concludes: “We live ona very fragile planet, and one of the biggest
offending industries is the built environment, but
she can be restored if we take the right steps
precipitously to do that.”

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Taking on greater responsibility
The climate crisis will be a huge driverin the shift towards a more responsible
real estate industry, and it will become
intrinsic to fiduciary duty, according tointerviewees across the spectrumof experience.

The next 20 years will be about
our industry contributing andbehaving better so that it’s properly
understood by people outside of theindustry - the important contribution
we make to productivity and healthof society as a whole. That is thechallenge and the outcome.

“The next 20 years will be about our industry
contributing and behaving better so that it’s
properly understood by people outside of theindustry - the important contribution we maketo productivity and health of society as a whole.
That is the challenge and the outcome,” says one
senior property professional.
But real estate’s version of responsible capitalism
is not just about carbon reduction. Interviewees
frequently refer to the “mounting pressure” on theindustry to ensure people have access to decent
quality, affordable housing.
This theme reflects growing concern over how
property companies “do the right thing” bytaking the social impact of their activities into
consideration and embracing new categories of
stakeholders — impact investing.
The social upheaval brought about by COVID-19
has certainly provided impetus to the growth of
impact investing. “Tenants and occupiers want
us to act,” said one pension fund investor in the2021 edition of Emerging Trends Europe.

PREVIOUSCONTENTSNEXT“In the past, we didn’t need to listen but thesector will be challenged by society to do morenow.”
Another interviewee that year lamented the lackof liquidity and quality in social infrastructure
across Europe, adding: “The pandemic has
shown that there are elements of our social
infrastructure that fundamentally don’t work andneed investment, healthcare being the mostobvious.”Today, the interviewees for this report refer
to loneliness, growing inequality and ageing
populations as among the societal problems that
real estate companies can — and should — help
alleviate.
Over the next two decades, therefore, expect
innovation from those signed-up to this new
breed of capitalism, which one interviewee
defines as based on “people, planet and profit”.
Stakeholder-anchored governance models could
be one version of this, while looking at strategies
from the standpoint of wellbeing and society willfeature regularly in board meetings.
“All of those perspectives need to be heard,”says one interviewee, whose firm has legallycommitted to provide quality affordable housingas part of its corporate mission. As this industry
leader suggests: “Housing is a human right.”

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Thinking long term
Inevitably the industry will move towards
longer-term management and oversightof projects: “It is really important to talkabout social inclusion and to define what
success means. Otherwise, you can design aneighbourhood, decide [for yourselves] it is agreat place and then walk away.”
The number of those adopting such ideas
may be relatively low in 2023, but interviewees
predict this will grow, particularly as the public
sector balance sheet becomes increasingly
stretched, and “people’s faith in politicianserodes”.
Thus, we will see property companies
increasingly involved in providing social
infrastructure, greater amounts of public realm,
healthcare and community spaces to ensure
quality of life in ever-crowded towns and cities.
“We must work with public authorities, withgovernment, the utility companies. You can’t
achieve placemaking alone.” One interviewee
hopes, however, that city authorities will also
become partnership-orientated: “There are
cities in Europe where they just hang onto therule book, they are not forward-thinking. That
will have to evolve.”
Thinking long term is mooted by many as vitalto this more inclusive approach to investment,
and naturally it will affect financial returns. One
veteran investor says: “External events force
you to think about the short term. What weneed to think about is our longer-term impact
on the built environment.

We must force ourselves to think this way, toreposition and rebalance.”
Industry leaders acknowledge it is getting“harder and harder” to have a short-term
investment horizon if you want to deliver social
good. “There are things you can do in a threeyear time frame — buy it, improve it and giveit back to the market in better shape. But how
you do it really matters. Low cost of capitalgives you more freedom.”
Another says: “When you speak to thepremium investors, they say we will have toaccept there’s going to be less of a return
because the reputational risk necessary
to make that higher return isn’t worth theaggravation that is needed to create that
return, especially if you’re also saying you
want to behave in a way that is better forsociety. You already see private equity houses
being more muted in their return expectations.
Even Blackstone is sweeping up more longterm capital – that’s interesting.”
Interviewees investing long-dated pension
money are seen as the property investors thatwill make headway in this respect, with theability to partner their “patient capital” with the
public sector to create better social outcomes.
“The single biggest issue for us to work on is
ensuring there is a productive and impactfulpartnership between the private and the public
sectors,” says one.

In principle, the recipe for success inregeneration in a post-pandemic world willbe “less competition, more leadership andcollaboration”.
“It’s early days. But it’s perfectly possible that
as we roll forward in the next 20 years it’ll
become obligatory and normal practice tobehave with an inclusive version of capitalism,”
one industry player reflects, adding: “Maybe
that means short-term private equity players
and investor-traders will get less and lesscredibility for what they do.”External events force you tothink about the short term.
What we need to think about
is our longer-term impact on
the built environment. We
must force ourselves to think
this way, to reposition
and rebalance.

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Customer service
A key question for property firms overthe next two decades will be whether
they base their business models on
physical real estate or embrace theoverall concept of providing space— and a service — designed aroundneeds of the occupiers they want
to attract.
The property professionals interviewed for thisreport suggest that real estate companies will
have to think much harder about a building’s
purpose as well as the objectives of theorganisation and people who will use the space.
“Fast forward 20 years,” says one interviewee,“and what we will see is that the built
environment will be human-centric across theboard: it will be in everything we do, the way weinvest money, the way we develop, the way webuild and manage.”
Over the past 20 years, Emerging Trends
Europe has charted a gradual shift in focus
from landlords to tenants and occupiers — andmore recently, customers. “There has been thatpivot,” says one senior consultant today, “so that
consumers are at the heart of all conversations.”

now prioritise high-quality spaces that help
occupiers to organise staff and collaborate more
effectively. “Companies will be very focused on
the purpose of space,” one interviewee says.
“Their employees want the office to serve areal purpose, not just offer what can be done at
home.”In retail, that sense of purpose will be about
experience and functionality — offering retailers
efficiencies that help supply consumers with
their e-commerce goods. Despite the current
headwinds, interviewees are confident of thecustomer’s desire to carry on visiting shops.
“Look at Amazon,” says another industry
player, “its incredible growth trajectory has now
plateaued. It is hard to say why but there remains
a place for bricks and mortar to offer retailers
cheaper ways to deliver merchandise.” As costpressures intensify, the argument runs, retailers
will increasingly see stores as opportunities tooffer click and collect and ship from the store,
removing the need for special warehousepickers: “ All of a sudden the story of bricks andmortar is more profitable.”This change in approach has been seen mostclearly in the fallout from the pandemic, which
triggered an existential crisis in offices and an
acceptance of hybrid working. Leasing decisions
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Working with customers
The successful property businesses will be thosethat work closely with their customers, to ensurethat the real estate they occupy reflects theircorporate culture.
As occupiers demand flexibility in theirrelationship with real estate it will place pressure
on the longevity and nature of a property’s
income stream. As one says: “The next 10 years
are going to be about reinventing leases.”In this respect, the industry will need to focus“on value and not just valuation” . While valuation
is driven principally by rents and yields andthen adjusted for a wide range of factors, thisis only helpful in the short term. Increasingly,interviewees argue, the more relevant issue iswhether the occupier can create genuine longterm value for its business through the activity
that takes place in its building. If so, then there
will be demand for that space, rents will rise andinvestors will want to own the building. “This iswhat drives value. This will mean that landlords
will become much more involved in ensuring thatthe occupant can create value by keeping thespace appropriate, up to date and conducive tothe relevant activity. While this may mean more
and more frequent capex, less income certainty
and more intensive management it will also
create real value.”
Space, therefore, becomes a service, andsuccessful real estate will be presented assuch, “not by an owner but an operator, investor,
developer, manager and creator of services all inone”. Interviewees predict that over two decades
these changes will have a “tremendous impact
on valuation” as new locations and building
structures emerge and match the need forflexible space and leasing options.
The interviewees developing mixed-use schemes
today are already registering these shifts, as
schemes that also contain neighbourhoods andpublic realm are proving much more complex tomanage. As one developer of a major European
regeneration project observes: “In the beginning
we started managing buildings but after a while
we realised that creating the value of the place
was not about managing the buildings but theentire neighbourhood. This has been the biggest
management change, and we are launching
digital platforms to help with it.”As this developer says, new systems havehelped increase footfall in the area, with events
attracting thousands of people. “That platform
means we can now introduce, for the first time,
footfall rent in the city. As the flow of people
goes up, so does the rent, as more people are
passing by the retail units. We are therefore
managing the place as a cultural platform, andwe are collecting lots of data. Through this we
can improve what we are doing because data
can lead to action. That is going to the next levelin the future.”
But there will be vertical integration withinproperty companies, too, which will bring
functions they previously outsourced — suchas property management — in-house to drive
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customer experience. Property companies
will also broaden their business models toprovide design, development, management
and operational services. This trend will beespecially relevant to healthcare, senior living
and residential.
Interviewees know that companies will be
required to be operational in nature as the
traditional property sectors are replaced withassets that are more multi-functional as wellas those that address societal need, such as
healthcare facilities. But further ahead there
could be new kinds of innovation needed, as,for example, urban farms become imperativefor food security. “The best companies will bethose that are operational,” says one. “In the olddays, it was about long-term safe, secure income
protected by an institutional lease. Now it’s about
being close to the operational activity in any
asset.”In the old days, it was about
long-term safe, secure income
protected by an institutional
lease. Now it’s about being
close to the operational
activity in any asset.

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YOUNG WOMAN WORKING ON LAPTOP BESIDE LAKE IN ITALY

Winning hearts and minds
Customers want business with “heart”, andtechnology has already increased transparency
over whether a company’s actions echo theirvalues, particularly around issues such ascarbon impact. But property owners must also
consider the “WeWork factor” and be mindfulof image and brand. “Reputation and approachmake a massive difference,” observes one
property player. “People don’t like facelesscompanies. We’re moving towards that more.”
In 2017, Emerging Trends Europe reported that
WeWork had “grabbed a new marketplace”.
“They don’t have tenants, they have members. It
will become a bigger proportion of the market,
maybe 10 percent in five years,” predicted one
interviewee. Five years earlier, Emerging Trends
Europe declared that the most active occupiersin office building design would pay greater heed

to the need to inspire creativity. “For firms like
Google, they don’t just want a box, they want anenvironment.”
In retail and leisure, consumers’ tolerance of
mediocre places will be lower: “People are timesqueezed, they are less likely to go to a good but
flawed place. People are getting more methodical
at making choices. That is what the internet
teaches us to do.”Interviewees say the internet has also enabled
shoppers to coalesce around entire movements,
influencing trends in the occupier market. Such aphenomenon is evident in China today as young
buyers are prioritising products “Made in China”.
The guochco (national tide) trend has sprung out
of national culture of confidence and pride andhas helped homegrown brands to expand theirmarket share.

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Digital connections
As industry leaders acknowledge, thedevelopment of broadband had been one of
the major milestones for society in the past 20
years, enabling people to connect the placeof work and shopping from where they live.
This will continue to shape real estate, withhybrid working influencing the way residential isdesigned as one example: “Is a 30-square-metre
flat appropriate for someone working from home?
We need to rethink distribution of office spaceversus residential space in the city.”
Real estate will be required to emulate
other industries and demonstrate a better
understanding of the customer than they haveshown to date.

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Technology – in the form of smart phone apps,
mobile tracking technology, for instance – will
help master this challenge by harvesting the datathat is imperative to improving, and maintaining,a pleasant environment. Smart building
technology and the internet of things will help
make those environments more operationallyefficient, not least in terms of energy usage.
The creation of value here will depend partly
on connecting the digital and virtual with thephysical environment to meet customers’changing needs. Everything is becoming
mixed-use, or as one industry player puts it:“Designated space for one purpose is completely
outdated; technology has allowed buildings topivot around several uses. Every space needs towork hard.”

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Another interviewee suggests that industry
leaders will need to invest more time inunderstanding “not only human psychology,
but the psychology of society, the quality ofcommunities, of families. Society has become
very complex, and its needs are changing;
there are more single parents, for instance. If
we understand those changes, then we’ll end
up designing better environments.”
As the industry moves away from the“extraordinarily outdated notion” of space
dedicated to one use, the markets will expect
major investment in smart building technology
to enable data management and create“digital interfaces” connecting a property to thecustomer. The industry will need more data
than ever. Or to put it another way, warns a realestate veteran: “Performance risk will be about
the absence of data.”
In the future, buildings and the customer will
be connected by the internet of things, andtechnology will decide on what’s needed
to meet the demands of the user, driving
efficiency and giving investors greatertransparency. One predicts that if big techcompanies delved into the real estate industry,
they would have an impact, especially as noone business has a large market share.
At the moment, there is no technologicalstandard for buildings, no operating system, but“a shared platform everyone will use … owned
by Google or Microsoft” could emerge.

Diversity drives performance
Perhaps the greatest change to a company’s
DNA in the future will be a broadening ofexperiences and greater equality. Though realestate has a long way to go, industry leadersrecognise that companies will need to moveaway from the dominance of “male, pale andstale” boards and instead embrace greater
diversity and increased skill sets.
One senior player argues that the “increasing
professionalisation” of the industry has
narrowed the type of individuals running
property companies because the emphasis
has been on efficiency. “The requirements
for leadership in the sector have changed,
more entrepreneurship is needed to addressunprecedented changes.”
The idea that diversity is vital for success isa narrative already taking root, and many are
optimistic that the groundwork being laid today
will reap rewards by Emerging Trends Europe
2043: “The companies disrupting the sector are
those companies which are moving faster thanthe more traditional culture allows.”
To support this and the increased
consumerisation of real estate, property
companies will be required to go outside theirtraditional skill sets to hire a wide range of
people: engineers, scientists, environmental
specialists, customer service specialists,
placemaking experts, those with architectural
backgrounds.

Says one interviewee: “The skillsets we need
to be good at real estate going forward will bevery different as we come to understand how
intrinsic buildings are to business productivity,
the competition for talent, to people’s healthand well-being.”
Or as another industry leader puts it, a wider
skill set is vital “if we are going to start treating
people like real customers”.

Not only human psychology, but
the psychology of society, thequality of communities, of families.
Society has become very complex,
and its needs are changing;
there are more single parents,
for instance. If we understandthose changes, then we’ll end up
designing better environments.

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Figure 7-4 Rankings of sectors' investment prospects over selected years

Real estate asa product
Over 20 years, real estate has expanded
far beyond the realm of office, retail andindustrial into a hugely diverse menu ofinvestable assets.

2004
1.

Shopping Centres

2.

Residential

2008
1.

City Centre
Shopping Centres

1.

City Centre Offices

2.

Apartment Residential(Rented)

2016

2020

2023

Retirement/Assisted
Living1.

Retirement/Assisted
Living

1.

New Energy
Infrastructure

2.= Flexible/Serviced
Offices & Co-working

2.

Logistics Facilities

2.

Life Sciences

3.

Co-living

3.

Data Centres

1.

3.= High Street Shops

2.

Central City Offices

3.= Industrial/Warehouse3.

Hotels3.

High Street Shops

5.

Retail Parks

4.

Shopping Centre

4.

2.= Healthcare

4.

Student Housing

4.

Self-Storage Facilities

6.

Central City Offices

5.= High Street Shops

City Centre Shopping
Centres

4.

High Street Shops

5.

Healthcare

5.

7.

Manufacturing

5.= Industrial/Warehouse5.

Shopping Centres

5.

Logistics Facilities

6.

Self-Storage facilities

Retirement/Assisted
Living8.

Surburban Offices

7.=

Retail Parks

6.

Retail6.

7.

Healthcare

Housebuilding for Sale

7.

Mixed Used Property

Private Rented
Residential

6.

7.=

Private Rented
Residential

7.=

Logistics Facilities

9.

Surburban Offices

8.

Retail Parks

7.

Student Housing

8.

Data Centres

7.=

Affordable Housing

10.

Manufacturing

9.

Residential

8.

Hotels9.

Affordable Housing

7.=

Social Housing

10.

Office9.

10.

Industrial/Warehouse

Flexible/Serviced
Offices & Co-working

10.

11.

City Centre Shopping
Centres

Private Rented
Residential

12.

Hotels

10.

Housebuilding for Sale

11.

Serviced Apartments

11.

Student Housing

13.

Manufacturing

11.

Serviced Apartments

12.= Hotels

12.

Leisure Hotels

14.

Suburban Offices

12.

Data Centres

12.= Industrial/Warehouse

13.

Co-living

13.

Central City Offices

14.

Science Parks

14.

Industrial/Warehouse14.

Self-Storage Facilities

15.= Housebuilding for Sale

15.

Serviced Apartments

15.

Industrial/Warehouse

15.= Central City Offices

16.

16.

Parking17.

Social Housing

Flexible/Serviced
Offices and Co-working

17.

Social Housing

18.

Leisure17.

Leisure18.

Surburban Office19.

Parking

18.

Housebuilding for Sale

19.

Business Parks

20.

Business Parks

19.

Central City Offices

21.

Suburban Offices

20. Retail Parks

22.

High Street Shops

21.

23.

Retail Parks

22. Business Hotels

24.

City Centre Shopping
Centres

The next two decades will be much more about
just how the industry oversees a blurring of the
distinctions between the many and varied property
types.
As industry leaders agree, advancing technology
and changing consumer habits have already helped
boundaries fall away between traditional sectors.
“We are starting to enter a world where users areagnostic to asset class. They can use it like retail,offices or industrial and logistics if they want,” saysa venture capitalist.
Such change inevitably leads to complex
challenges around valuation and underwriting aswell as the need for a far deeper analysis of risk
and return. Yet the move away from single use realestate is seen by some as crucial to ensuring longterm sustainability. “Blended buildings really matterbecause space that sits empty and underutilised ishugely wasteful on every level, whether it is climate
or cost,” argues an industry futurologist.

2010

Source: Emerging Trends Europe survey 2023

Emerging Trends Europe has analysed a burgeoning number of sectors overthe past two decades, from just eight in 2004 to 27 in 2023. This is driven
by increased diversity in housing and growing investor interest in alternative
assets, which have been the top-ranking sectors over the past five years.

25.

Out of Town Shopping
Centres/Retail
Destinations

23. Business Parks
24. High Street Shops
25. City Centre Shopping
Centres
26. Out of Town Shopping
Centres/Retail
Destinations
27.

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Parking

Suburban Offices

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This view of real estate contrasts sharply withthe “asset allocators” of 20 years ago, whoinvariably ended up with 50 percent in retail, 30
percent in offices, 20 percent industrial. “That’s
all we did because that’s where you could getlong institutional leases,” recalls one senior
institutional asset manager. “I’m astonished how
myopic we were.”As early as 2006, however, Emerging Trends
Europe highlighted “a huge array of investors”
interested in gaining exposure to such new areas
as nursing homes, retirement communities,
student housing, self-storage, car parking
facilities, pubs, recreational facilities, spas,
resorts, entertainment complexes, condo-hotels,
schools, hospitals, airports.
Diversification intensified following the GFC asinterest rates stayed low and income-seeking
investors were impelled to engage with a wider
range of asset types to find a home for theircapital. Interviewees recall an “industry-wide”
move towards alternative, or operational, realestate. And in their search for deals and yieldin an increasingly liquid market, investors losttheir fear of specialist management. The idea ofproperty as a service has gained traction eversince.
Meanwhile, real estate has gradually morphed
into “real assets” as the risks and rewards ofinfrastructure investing have become better
understood. “Until 15 years ago infrastructurewasn’t really an established asset class.
Infrastructure investments in the early days
were more private equity-like, higher on the risk
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curve. Today, we have more clarity about whichinvestments have a distinct infrastructure profile,and what is more private equity or real estatelike,” says the head of real assets for a pension
fund.
For good measure, “social infrastructure” hasbeen added to the investing mix. Governments
seeking private sector capital to help deliver
health, education and social care facilities havefound willing partners in real estate investors
keen to secure low-risk, stable income streams
insulated from market cycles.
Inevitably, the relative appeal of some sectors
has declined over 20 years, while others arein the ascendancy. The most striking rise andfall over the period is that of logistics and retail,which caught out many property professionals
in the early editions of Emerging Trends Europe.
From 2004 to 2007, a blinkered real estateindustry repeatedly identified shopping centres
and retail parks as the segments offering mostscope for growth while roundly dismissing thevast potential of e-commerce. As this industry
leader put it in 2004: “Some products sell wellover the internet, others don’t. It’s all part of retailevolution and most retailers are adapting to takeadvantage.” By 2013, however, e-commerce wasturbo-charging Europe’s logistics market, and theindustry proclaimed: “Warehouses are the newretail spaces.”
As one retail asset manager now acknowledges:“The internet has been transformative of theretail environment, but of a retail sector that was
lazy and commoditised and ripe for disruption.”

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There is no question that technology has had aprofound impact across real estate over the last
20 years, but according to a property company
CEO, “that’s really been less about the productsthat technology has delivered, and more about
the choice that technology has given customers.
Physical retail, which provided less choice, haslost out to e-commerce, which provided more.”Moreover, an industrial sector that has alreadybroadened to include last-mile delivery, dark
kitchens and datacentres, is likely to expand
further with advances in technology. Battery
storage, electric vehicle charging stations,carbon sequestration, and satellite stations
are all identified as potential investment
opportunities.
With greater opportunities and diversity of realestate, comes investment risk, albeit in different
guises than before. “We are already starting
to see things like pharmaceuticals and car
parts being 3D-printed,” one technology expert
cautions. “If you could have a big printer in the
middle of a city that prints all of the things thatyou need, why would you need as many boats,trains and logistics warehouses?”
But against a background of continued online
sales growth and onshoring, few interviewees
are betting against sustained demand for evermore sophisticated warehouses over the next
20 years.

Workplace evolution
As with retail, the ever-improving online
experience is providing office workers with new
choices, threatening to bring further disruption
to what remains, albeit to a somewhat reduced
degree, the largest real estate sector. Just how
much disruption is a subject that polarises
opinion in the industry.
On one side there is the view, advanced bya senior consultant, that the requirement for
more space to accommodate “de-densification,
more investment in making spaces attractive
for younger workers to woo them into the officefor collaboration spaces, coffee shops, gyms,
amenities,” will balance out the trend toward
remote working.
For the sceptics, such opinions represent“grasping at straws” . As an office sector
analyst says: “It doesn’t stack up when the
average return to the office is for two and ahalf days a week. The average organisation
can reduce by 30 percent, a whole swath more
could easily reduce by 50 percent. For thereal estate markets, for the developers, for theinvestors behind them, that’s an incredibly scary
proposition.”
Some believe that reduced demand, combinedwith increasing obsolescence provoked byenvironmental regulation and the failure tomeet customer demand for sustainable,
healthy buildings, could cause serious pain for
office investors over the coming years: “Someowners are sitting on assets which look likecore because they are leased, but they areworse than junk bonds because when the lease
expires, they won’t be re-leased and they willneed to be repurposed. In the next 20 years thatwill have a tremendous impact on valuation.”
Others suggest that the pandemic-driven
acceleration of the trend towards “place
independence” in the working lives ofprofessionals will have a profound effect on theevolution of workplaces, and not just valuation.
“The geography of work has changed,” says
an office-sector veteran, who predicts thefurther development of the “space-as-a-service”
concept. “Work will be done on tech platformsof lots of buildings linked up, with companies
contracting with those platforms, a bit like
Spotify, and their people working everywhere.
Workplaces will become an amenity that people
will expect to have nearby to where they live.”
In many respects, the debate over the futureof the workplace epitomises the inevitable but
challenging move away from old-fashioned,
single-use sectors. As one real estate
operations expert suggests, the lines between
workspace and other forms of amenity will
become increasingly blurred. “We all live in a
virtual world, whether we like it or not. PostCOVID, people are coming back to the city, but
not to sit in the office. The restaurants and pubs
are packed. Humans need to congregate andsocialise. In 1600s London, business was donein coffee houses and pubs. We have come fullcircle. If we think about that, and how virtual our
lives are, how do we marry the two?”

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Cities andplacemaking
Urbanisation has been one of the key
megatrends, embraced by the real estateindustry as a driver of opportunity andespecially over the past decade or so.
Just as the industry was hit by the global financial crisis(GFC) in 2008, another historical moment was marked
by the United Nations (UN) when it reported that over 50
percent of the world’s population lived in urban areas.
Ever since then, Emerging Trends in Europe has reflected
the lasting impact of the GFC and urbanisation, albeit
for very different reasons. In those intervening years theindustry has, for the most part, seen urbanisation as apositive, long-term influence.
And yet the pandemic saw city centres empty ofpeople, leading some to ponder at the time whether
a paradigm shift was taking place. Could the next 20
years see a reversal of the trend? Unlikely, according toindustry leaders. “The massive efficiencies of cities andagglomeration benefits are hard to replicate in anotherformat,” says a property company CEO, expressing acommonplace view among interviewees.
As Emerging Trends Europe has shown over the years,
the real estate industry has made the most of the trend
towards urbanisation. “We don’t invest in countries
anymore. We invest in urban areas,” said an interviewee
in 2016. It was a sentiment echoed across the industry,and one which became a cornerstone of many
investment strategies.

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PRAGUE, CZECH REPUBLIC“Urbanisation continues to be a buzzword
for the industry,” said an industry leader in2017. “Successful cities facilitate the largest,
most diverse number of people to collaborate
effectively and share resources, whether that is
infrastructure, technology, cultural facilities orideas. In short, the most successful, growing
cities embody the sharing economy.”
Today, the UN reports that 56 percent of theworld’s population live in urban areas, and asmuch as 75 percent in the EU, which partly
explains why the consequences of urbanisation
have not been universally benign. Gentrification
has priced lower-paid workers out of the innercities, and the lack of affordable housing is now awidespread problem across Europe: “Cities havebecome more difficult places to live. They havestruggled with the idea of fairness. It is one of
the biggest challenges they face going forward,”says an architect today. “We’re playing catch-up
to try and make our cities better places to live,on climate change, and on the way we design
adaptable uses for future-proofing.”
It is noteworthy how much more sophisticatedthe industry’s understanding of placemaking
has become over the years. In 2006, Emerging
Trends Europe revealed that while mixed-use
schemes were gaining “increased acceptance”
among survey respondents, the “majority remainwary” . But by 2008, that fateful year, respondents
identified mixed-use and urban regeneration
investments as having the best growth prospects.
Urban context and community are now almost
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importance, with success measured not at thescale of the individual asset but across thebroader environment.
New mixed-use districts have sprung up in
Europe’s main cities, with London’s redeveloped
King’s Cross name-checked by several
interviewees — and many others over theyears — as an outstanding example of what
can be achieved. Access to infrastructure, “thefootfall that the transit induces, that is a gigantic
foundation for mixed-use” . Partnerships withpublic sector authorities that are willing to beflexible, and understand developers’ constraints,
are acknowledged to be crucial factors for
success.
There is support for the “15-minute city”, an urban
planning concept which, as the name suggests,
involves people accessing all their essential
needs within a 15-minute walk or bike ride. The
aim is for a big city to have multiple, thriving
mixed-use neighbourhoods and so improve thequality of life for its citizens while dramaticallycutting car usage and carbon emissions.
In themselves such objectives are hardly new, butthey gained currency during COVID. While somemunicipal authorities looked on as people left
city centres, others such as Paris gave renewedbacking to the 15-minute city. For its supporters,
this concept is seen as a contemporary response
not just to the pandemic but to the climate crisis.

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And yet, a proven mechanism to link the social
value and economic activity generated byinfrastructure and placemaking to the value ofreal estate, remains elusive. Such an innovation
would enable long-term investors to commit
more capital to large urban projects. As an urban
strategy consultant puts it: “Allocating investment
benefits and risk is the new frontier. That willprobably determine the future of city-wide
development as much as any planning policy orplacemaking strategy.”
Many interviewees highlight social inclusion asa crucial challenge for the next 20 years. “Fewerand fewer people can afford to live in big cities.
Unless we start dealing with that, it is going tohit the real estate industry. We need to have a
discussion around inequality and how we create
inclusive cities,” says a social housing investor.
Real estate may struggle to address what isessentially a wider societal and economic
problem, says another consultant. “We cancreate more affordable housing, but the issues
that create inequality and polarisation in oursociety are not all attributable to real estate.”
Nonetheless, being seen to be part of thesolution will become increasingly important toinvestors’ reputations: “Attacking the inequality insociety will become a performative part of what it
takes to be a successful real estate developer.”“Not so long ago the smart city philosophy was
about efficiency. It has become more humancentred, about how people get around, howcommunities interact, who we are creating
resilience for,” notes an interviewee.
Artificial intelligence (AI) and data analysis could
have a seismic effect on land use within urban
areas, claims another: “A piece of generativetechnology will run through millions of iterationsof what could be on a plot of land. It’ll produce
the optimal design to deliver the maximum
economic benefits and will have figured out what
the whole supply chain looks like to be able todeliver that 50 percent faster than you could do it
today, for 30 percent less money.”
Not all interviewees are convinced. “We aresomehow believing that technology is goingto solve it all, and I don’t see that happening,”says an architect. Instead, the industry should
heed the example of hotels, which opened theirdoors to become an amenity for surrounding
communities during the pandemic. “We should
be building buildings for everyone, not for justa single use. You don’t build a big office orresidential building for the ground floor, you build
it for the space above. Think of the ground floor
as free, and of all the things that people could dowith it, so that the building becomes an integral
part of the community in an operational sense.”

Digitisation may offer some answers, and thesmart city agenda is placing greater weight tosocial and environmental factors.

MODERN DEVELOPMENT WITH ELECTIC CHARGING P0INTS

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20 YEARS OF EMERGING TRENDS EUROPE

ZEELAND BRIDGE WITH WIND TURBINE, NETHERLANDS

In 2020, Emerging Trends Europe analysed thepotential impact of technology on transport. The
report concluded that real estate would havethe opportunity to “embrace mobility solutions
that help identify and enhance value for new
locations while changing the way we movearound the world, and thus the way that world isbuilt.” Micro-mobility, self-driving vehicles, drones
and perhaps even hyperloop could have a major
impact on real estate over the next 20 years.
“Within the next 10 years, autonomous vehicles
will be ubiquitous,” claims a green proptech
entrepreneur, predicting that the culture ofindividual vehicle ownership will gradually be
replaced as tech companies shift their models
to “transport as a service” . Eliminating the needfor parking, driveways and garages could havea hugely beneficial effect on urban planning andmay even help alleviate the affordability crisis.
“We can use that space effectively to housepeople at a lower cost.”

New ideas for urban living
The impact of COVID across Europe’s cities
still resonates clearly among industry leaders.
Though most interviewees believe the pandemic
may have caused only “a pause in urbanisation”,
others believe its legacy will shape the urban
fabric in novel ways over the coming years.

PREVIOUSCONTENTSNEXT

We will also see the hydrogen
economy come through in the next
20 years, with cleaner, lower-costhydrogen-powered planes, trains,
automobiles, and boats that movethings around because it’ll justmake more sense.
“The acceleration of remote work and people’s
search for a good quality of life and sustainable
environment mean in the tier one cities theactual desirable locations to live certainly do
not include the downtown core. Now you have amuch broader competition among locations to be
the desirable place to settle and to work,” says a
US-based analyst.
Technological advances will fuel thesuburbanisation of real estate, suggests the
COO of a global asset management business:“We will also see the hydrogen economy comethrough in the next 20 years, with cleaner,
lower-cost hydrogen-powered planes, trains,
automobiles, and boats that move things aroundbecause it’ll just make more sense. You willprobably also have a hydrogen fuel cell in yourhome, which will power your needs so you canmove to locations that are further andfurther off-grid.”

YOU ARE HERE

20 YEARS OF EMERGING TRENDS EUROPE

Climate change could displace two to threebillion people globally from areas that are nolonger habitable, according to a futurologist:“What does that mean for housing? How are
we going to design our villages and our cities tointegrate new cultures?”Those refugees may supplant declining
populations across European countries where
the demographic is ageing, suggests an analyst.
“Cities that attract young people will be thewinners of tomorrow, and societies that cannot
are going to be the vacant losers of tomorrow or
be taken over by other nomadic climate refugee
populations.”
Radical new models for urban living could
be needed in the light of accelerated climatechange, and as this analyst predicts, theemergence of “an asset class of moveable
communities”, featuring solar power, wastewater
recycling, and hydroponic and aquaponic foodproduction. “You want to be able to relocate
your assets in the event of natural disasters andtropical storms.”
A tech entrepreneur envisages resilient
neighbourhoods capable of producing their own
food, designed and managed by sophisticated,
adaptive AI. “We should not be paving overfarmland, but actually producing more artisanal
ingredients than would have been there before,grown in a controlled environment next to eachhouse. There is a central square where you havepiazza kitchens, a year-round farmers market,
commercial spaces, clinical and dental health,a shared work environment, an organic

supermarket, this beautiful concept ofneighbourhoods that are living within nature, andnot separate from it.”Such visions may appear utopian, but as anotherworkplace analyst says, the response of somecities to the pandemic — banning cars fromcity centre streets to be replaced by community
activities — shows how abrupt change canstimulate bold solutions. “The hope is not[just] that we’ll see a reduction in some of the
global pressures we’re facing, but actually thatgovernments and business leaders will becomebold in their replies. And that they’ll then stickwith some of those bold replies and change ourlives for the better as a result.”

Cities that attract young people willbe the winners of tomorrow, andsocieties that cannot are going tobe the vacant losers of tomorrow
or be taken over by other nomadic
climate refugee populations.

FEMALE BAKERY STALL HOLDER AT FARMERS FRESH FOOD MARKET

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CITY PROSPECTS

APPENDIXCITY PROSPECTS

EUROPE FROM SPACEPREVIOUSCONTENTSNEXT

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APPENDIX

Figure 8-1 City rankings in 2023

Source: Emerging Trends Europe survey 2023

Investment

City Prospects
The city rankings are based on overall
prospects, which are determined by how
much they deviate from the average/meanscore; these are shown in Figure 8-1.
The scoring is based on the views of both those who arefamiliar with the city and others who potentially could be
investing or developing there but are not.
The investment and development prospects provide thelocal outlook. For these, respondents who are familiar withthe city scored the expected change for 2023 comparedwith 2022 on a scale of 1 = decrease substantially to
5 = increase substantially, and the scores for each city
are averages.

City

Rank

Development
Score

Rank

City

Rent
Score

Rank

City

Capital values
Score

Rank

City

Score

1.

London2.22

1.

London2.08

1.

London1.92

1.

London

1.74

2.

Paris

1.77

2.

Berlin

1.66

2.

Paris

1.56

2.

Paris

1.40

3.

Berlin

1.71

3.

Paris

1.66

3.

Berlin

1.48

3.

Berlin1.32

4.

Madrid

1.55

4.

Madrid

1.53

4.

Amsterdam

1.38

4.

Madrid

1.24

5.

Amsterdam

1.54

5.

Munich1.45

5.

Madrid1.37

5.

Amsterdam

1.23

6.

Munich

1.52

6.

Amsterdam

1.42

6.

Munich1.35

6.

Munich1.18

7.

Frankfurt

1.34

7.

Frankfurt

1.26

7.

Frankfurt

1.15

7.

Frankfurt

1.06

8.

Hamburg

1.23

8.

Hamburg

1.15

8.

Hamburg

1.06

8.

Barcelona

0.97

9.

Barcelona

1.14

9.

Barcelona

1.10

9.

Barcelona

1.03

9.

Hamburg

0.95

10.

Milan

1.11

10.

Milan

1.09

10.

Milan

0.95

10.

Milan

0.91

11.

Lisbon0.99

11.

Lisbon0.97

11.

Dublin0.89

11.

Dublin0.80

12.

Vienna0.96

12.

Dublin0.90

12.

Lisbon0.85

12.

Lisbon0.80

13.

Dublin0.94

13.

Vienna0.90

13.

Vienna0.83

13.

Vienna0.78

14.

Copenhagen

0.84

14.

Copenhagen

0.76

14.

Brussels

0.80

14.

Brussels

0.70

15.

Brussels

0.82

15.

Brussels

0.74

15.

Warsaw

0.77

15.

Warsaw

0.65

16.

Warsaw

0.79

16.

Warsaw

0.74

16.

Copenhagen

0.68

16.

Zurich0.62

17.

Zurich0.74

17.

Zurich0.67

17.

Zurich0.67

17.

Copenhagen

0.61

18.

Manchester

0.73

18.

Manchester

0.66

18.

Manchester

0.65

18.

Manchester

0.60

19.

Stockholm

0.69

19.

Stockholm

0.66

19.

Stockholm

0.63

19.

Rome

0.56

20.

Luxembourg

0.66

20.

Luxembourg

0.60

20.

Luxembourg

0.61

20.

Stockholm

0.52

21.

Rome

0.64

21.

Rome

0.60

21.

Rome

0.54

21.

Luxembourg

0.51

22.

Birmingham

0.48

22.

Birmingham

0.48

22.

Lyon

0.45

22.

Athens0.44

23.

Athens0.47

23.

Athens0.46

23.

Athens

0.44

23.

Lyon

0.42

24.

Lyon

0.46

24.

Lyon

0.44

24.

Birmingham

0.44

24.

Birmingham

0.40

25.

Helsinki

0.45

25.

Helsinki

0.43

25.

Edinburgh

0.40

25.

Edinburgh

0.36

26.

Edinburgh

0.43

26.

Edinburgh

0.40

26.

Prague0.38

26.

Helsinki

0.35

27.

Prague0.43

27.

Prague0.40

27.

Helsinki

0.37

27.

Prague0.34

28.

Budapest

0.31

28.

Budapest

0.31

28.

Istanbul

0.30

28.

Istanbul

0.31

29.

Istanbul

0.25

29.

Istanbul

0.26

29.

Budapest

0.29

29.

Budapest

0.28

30.

Oslo

0.23

30.

Oslo

0.24

30.

Oslo

0.22

30.

Oslo

0.19

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YOU ARE HEREABOUT THE REPORTABOUTTHE REPORTLONDON.UK

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APPENDIX

What are your business’s primary activities?

About the survey

Survey responses by geographic scope of firm

Private property company
or developer

31%

Homebuilder orresidential developer
Publicly listed property
company or REIT

7%

Architect/designer

7%

Proptech firm

Emerging Trends in Real Estate® Europe 2023 reflects
the views of 1,038 property professionals who completed
surveys, were interviewed or took part in a series ofroundtable meetings across Europe as a part of theresearch for this report. The views expressed are fromthese surveys, interviews and roundtable meetings and do
not express the opinions of either PwC or ULI.
The interviewees and survey participants represent awide range of industry experts, including investors, fundmanagers, developers, property companies, lenders,brokers and consultants. A list of the interviewees androundtable participants in this year’s study appears on thefollowing pages. To all who helped, ULI and PwC extend
sincere thanks for sharing valuable time and expertise.
Without their involvement, this report would not have beenpossible.

4%

24%

2%
Pan-European
focus

Focussedprimarily focussed
on one country

6%

Globalfocus

Country

Finland

Source: Emerging Trends
Europe survey 2023

1

NorwaySurvey responses by geographic scope of firm (%)%

1

Sweden%3

Luxembourg

1

Belgium

5

Netherlands

6

Cyprus1

Norway1

Czech Republic

1

Poland3Denmark

1

Portugal2

Finland

1

Spain

14

1

France7

Sweden1

FranceGermany

16

Switzerland

6

Greece3

Turkey3

Ireland

4

United Kingdom

15

Italy

5

Other

2

1

IrelandUK

15

Netherlands

7

2

6

PolandBelgium

Luxembourg

Portugal1

Denmark

Austria

4

5Germany

16

Czech

Switzerland

Austria63

1
3

Romania

32

Italy
Spain

14

5

Greece3

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Other

Source: Emerging Trends
Europe survey 2023

Source: Emerging Trends Europe survey 2023

Country

51%

3%

Other

To mark its 20th year in circulation, this year’s issue
includes an analysis of key historical trends and evolutions
within the European real estate sector over the past two
decades – such as changes in city and sector rankings.

What is thegeographic scopeof your business’s
activities

7%

Real estate operator
Bank, lender, or
securitised lender

23%

15%

Institutional/equity investor

The report, which is undertaken jointly by PwC and the
Urban Land Institute (ULI), provides an outlook on realestate investment and development trends, real estate
finance and capital markets, cities, property sectors andother real estate issues throughout Europe.

2%

25%

Fund/investment manager

Now in its 20th edition, Emerging Trends inReal Estate® Europe is a highly regarded andwidely read trends and forecast publication in
the real estate industry.

2022

30%

Real estate services firm

TurkeyCypris1

3

YOU ARE HERE

APPENDIXInterviewees and roundtable participants
A/O PropTech
Gregory Dewerpe
Aktiebolaget Fastator
Svante Bengtsson
AB Sagax
Jaakko Vehanen
Aéroports de Paris
Hubert Fontanel
Aevitas Property Partners
Jan Dobiáš
AEW
Thomas Poulis-Leinberger
AF Eiendom
Otto Christian Groth
AFIAA Investment Foundation forInternational Real Estate Investments
Ingo Bofinger
Marco Böhi
AGC Equity Partners
Anton Bischof

ALFA Development
Kristian Hare
Andreea Kaiser
Jan Kristensen
AlidesRikkert Leeman
Allianz Real Estate
Sébastien Chemouny
Annette Kröger
Kari Pitkin
Donato Saponara
François TrauschMegan Walters

Amundi Real Estate
Giovanni di Corato

AtenorEric Bloyaert

Azora
Cristina García-Peri

Annington
Jos Short

ATI Project
Giulia Carravieri

Bain Capital Credit
David Cullen

APG Asset Management
Patrick Kanters
Robert-Jan Foortse

Atrium European Real Estate
Karol Bartos

Balder Danmark
Christina Holberg Fenger

Aurec Capital
Adam Wilgus

Baltisse
Alex De Witte

Aurora Eiendom
Aage Lilleberg

Bank of America Merrill Lynch
Struan Robertson

Austrian Institute of Technology
Theresa Fink

Banque Cantonale de Genève
Sylvie Hoecht

Avalon Real Estate
Federico Chiavazza

Bauwens
Felicia Heine

Avant Capital Partners
Lorenz Merk

Bayerische Versorgungskammer
Steffen Wodarz

Apollo Global Management
Roger Orf
ArcadisAntonello Magliozzi
Joris Winters

Alma Property Partners
Stefan Albinsson
Sloan Wobbeking

ArdatzMiguel Mujica Arriagada

alstria office REIT-AG
Alexander Dexne

Areim
Caroline Temse

Altera Vastgoed
Jaap van der Bijl

Art-Invest Real EstateMark Leiter
Dr. Markus Wiedenmann

Avara
Harri Retkin

BayernLB
Alexander Huber

Aspelin Ramm
Gunnar Bøyum

AXA Investment Managers
Rainer Suter

BCP Capital
Ray Crowley

AM Alpha
Martin Lemke

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APPENDIX

COIMA
Gabriele Bonfiglioli

Bovieran Danmark
Susanne Joseph Schou

CapManMagnus Berglund
Juhani Erke
Peter Gill
Marcus Lotzman

Commerz RealJens Böhnlein

Cushman & Wakefield
Jeff Alson
Aiden Gavin
Maciej Rostropowicz
Colin Wilson

British Land
Simon Carter
Mariam Hussain

CatellaJesper Bo Hansen
Xavier Jongen

Commuty
José Antonio De Pedro Cuadrado

Cyfield
Despina Chrysochou

Confidencial Imobiliário
Ricardo Guimarães

DEAS Group
Rikke Lykke
Nadim Stub

BefimmoJean-Philip Vroninks

Borio Mangiarotti
Edoardo De Albertis

Beisheim Holding
Martin Bruns
Berlin High End
Jon Svenningsen
Berlin Hyp
Ariana Popal
Big Yellow GroupJames Gibson
Blackstone
James Seppala
BLOXHUB
Jakob Norman-Hansen
BNP Paribas Real Estate
Nathalie Charles
Stephen Coticoni
Bohill Partners
Emily Bohill
Bondi Consult
Dominik Erne

CBRE
Gunnar Larsson

Brookland
Nassar Hussain

ceos Investment
Prof. Dr. Stephan Bone-Winkel

Brunswick Real Estate
David Hävermark
Hanna Rauhala

Bryan Cave Leighton Paisner LLP
Henry Ranchon

Cale Street Partners LLP
Wilson Lee
CalumJakob Axel Nielsen

Covivio
Alexei Dal Pastro
Olivier Estève

Cibus Nordic Real Estate
Lauri Tiensuu

Bruun & Hjejle
Christian Schow Madsen

C.W. Obel Ejendomme
Torben Black

Corvus InvestÖzlem Gökçe

Credit Suisse
Marc-Oliver Tschabold
Olafur Margeirsson

citydev.Brussels
Benjamin Cadranel
Clarion Gramercy
Rory Buck

Cromwell Property Group
Klaus Larsen
Danya Pollard

Climate Alpha
Dr. Parag Khanna

CTP Invest
Susanne Eickermann-Riepe

Cofinimmo
Jean-Pierre Hanin

DECHESNE The Company
Françoise Dechesne
Deka Immobilien Investment
Burkhard Dallosch
Deutsche Finance International
Jonni Glick
Develia
Andrzej Oslizło
Dominicé & Co
Diego Reyes
DomolisLouis Donnet
Doxa
Erik Landström

Bonnier Fastigheter
Tomas Hermansson

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APPENDIXDWS Group
Matthias NaumanneQ Asset Management
Tero Estovirta

Formuepleje
Kristian Voldsgaard

GoodbodyColm Lauder

Eaglestone
Sophie Lambrighs

Essentia
José Gil Duarte

Fredensborg Bolig
Magnus Aune Hvam

Gowling WLG
Matt Walker

ECE Group
Alexander Otto
Henrie Koetter

Europa Capital
Rob Sim

FREO Group
Erwan Le Berre

Grand Paris Aménagement
Fabien Guisseau

Fabrica Immobiliare
Giovanni Maria Benucci

GARBE Institutional Capital
Dr. Thomas Kallenbrunnen

Greenberg Traurig
Jolanta Nowakowska-Zimoch

Hines
Vanessa Gelado
Anastasia Hassiotis
Lars Huber
Ronen Journo
Malte Leschewitz
Brian Moran
Claire Pomroy
Simone Pozzato
Christoph Reschke
Carlo Rositani

Fastighets AB Balder
Eva Sigurgeirsdottir

GecinaMéka Brunel

Gresham House Ireland Real Estate
John Bruder

Home.Earth
Rasmus Nørgaard

Fastighets AB Trianon
Anna Heide

Gefion Group
Thomas Færch

Greyfield GroupSarah Dungs

HRS Real Estate
César Vuadens

Fastighetsbolaget Emilshus AB
Emma Malmeby

Generali Real Estate
Alberto Agazzi
Nicholas Garattini

Habitat Inmobiliaria
José Carlos Saz

IE University
Ioane Menabde

Heidrick & Struggles
Chantal Clavier

ifa
Michael Baert

Heimstaden
Mattis Falkentoft

Ikano Bolig
René Brandt

Hibernia REIT
Kevin Nowlan

Ilmarinen
Mikko Antila

EDGE
Coen van Oostrom
Edmond de Rothschild REIM
Pierre Jacquot
Jan Schorno
Eiendomsspar
Jon Rasmus Aurdal
EjendomDanmark
Morten Marott Larsen
EllandiMark Robinson
Elo
Tatu Pakarinen
EPP
Tomasz Trzósło

Fidelidade PropertyJoão Nuno Madeira de Andrade
Fokus Asset Management
Peter Haahr
Foncière INEA
Phillipe Rosio

Generation Global
Jack Renteria
GenslerJuliette Morgan
William Yon
Goldman Sachs
Oumniya Bouhdoud
Jim Garman

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Marc Lyon
Reimer Siegert

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YOU ARE HERE

APPENDIX

Infinium Logistics
Phil Bayliss

Jim Power Economics
Jim Power

Kondor Wessels Wohnen Berlin
Vincent L.M. Mulder

ING
Elvira Kruger
Włodzimierz Skonieczny

JLL
Barbara Cominelli
Kasper Deforche
Jan Eckert
Christian Ulbrich

Kryalos
Paolo Massimiliano Bottelli

Jones Day
Paolo Foppiani

La Foncière
Michael Loose

JP Advisory & Management
Wolfgang von Crailsheim

La Française
Philippe Depoux

JP Morgan Asset Management
Paul Kennedy

LakeRock Capital
Alexandre Costa

KerebyLars Pærregaard

LaSalle Investment Management
Brian Klinksiek

Keystone Investment Management
Morten Schultz

LeesmanTim Oldman

KMC Properties
Kristoffer Holmen

Legal & General Investment
Management
Bill Hughes

INOWAI
Vincent Bechet
Jean-Nicolas Montrieux
Intervest Offices & Warehouses
Gunther Gielen
IPUT Real Estate Dublin
Caroline McCarthy
Irish Institutional Property
Pat Farrell
Irish Residential Properties
Margaret Sweeney
Ivanhoé Cambridge
Audrey Camus
IWG
Christophe Burckart
Mark Dixon
JeudanSøren Bergholt Andersson

KojamoVille Raitio

Lisbon School of Economics &Management
Gilberto Jordan
Lister Buildings
Jan Noorda

Kunz Wallentin Rechtsanwälte
Dr. Thomas Seeber

LOANLAND
Dr. Daniel Schmidt
Lucerne University ofApplied Sciences
Robin Odermatt
M&G Real Estate
José Pellicier
m3 Groupe
Renaud Vincendon
Merlin Properties
Ismael Clemente Orrego
Metrovacesa
Jorge Pérez de Leza
Mileway
Marco Fok

Linden Property Consulting
Markus Linden

Mondialma
Alma Jacobson

Kollitsch Unternehmensgruppe
Alexander Pawkowicz
Jasmin Soravia

PREVIOUSCONTENTSNEXTMRV Research
Bernhard Seyringer
NamiraMarco Plazzotta
Navitas Capital
Michael Spies
Network Space
Richard Ainscough
NexityFernando Vasco Costa
Nextensa
Michel Van Geyte
Nhood Services Italy
Michele Montevecchi
Niam
Torstein Bomann-Larsen
Nordea Bank
Timo Nyman
Nordic Hotel Consulting
Christian Kielgast
NorfinFrancisco Sottomayor

YOU ARE HERE

APPENDIX

NREP
Søren Olsen
Jens Petter Hagen
Maciej Piotrowicz
Toke Clausen
Susse Schaumann
Nuveen Real Assets
Mike Sales
Nykredit
Thomas Yoo Nielsen
OberlandWilliam Riordan
OBOS
Nils Morten Bøhler
OP Real Estate Asset Management
Pami Pihlström
Orion Capital Managers
Van Stults
Oscar Properties
Fanny Algstedt
OUTCOMIST
Chris Choa

Oxford Properties Group
Hala El Akl
Dean Hopkins
Jo McNamara

PGIM Real Estate
Greg Kane

P+, Pensionskassen for Akademikere
Søren Grusgaard
P3 Logistic Parks
Frank Pörschke
PAREF Gestion
Anne Schwartz
Pareto Securities
Oskar Sandblom
Partners Group
Souad Cherfouh
Patrizia
Mahdi MokraneAmal del Monaco
pbb Deutsche Pfandbriefbank
Charles Balch
PembrokeStefan Andersson

PineBridge Investments
Marc Mogull
Luca Scollo
PLP Architecture
Lee Polisano

PwC Germany
Harald Heim
Dirk Hennig
Thomas Veith

Ramboll
Lars Ostenfeld Riemann
Jörgen Sigvardsson
Jenny Wittan

PwC Greece & Cyprus
Constantinos Savvides
Lila Tsitsogiannopoulou

REAL Estate
Stephan PlogPwC Ireland
Joanne Kelly
Paul Moroney

Polish Properties
Chris Grzesik
PraderaAgata Brzezińska
Primonial
Juergen Fenk
Proark Group
Thomas Bang-Pedersen
Prologis
Ben Bannatyne
Public Property Invest
Morten Kjeldby
PwC France
Geoffroy Schmitt

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Realty Corporation
Thibault Weston Smith

PwC Netherlands
Koniwin Domen
Bart Kruijssen

RefundosFrederico Arruda Moreira

PwC Poland
Kinga Barchoń

ReGen Villages
James Ehrlich

PwC Sweden
Thomas Almendal

RESH Advisory
Sandra Hochleitner

PwC US
Alexis Crow

Resi Company
Konstantinos Papadopoulos

QuadReal Property Group
Stephanie Chan
Rosemary Feenan

Revelop
Philip Niklasson
Thomas Sipos
Johan Spångberg

Rabobank
Hans-Hugo Smit

PGGM
Tinka Kleine

Realstone
Julian Reymond

Rhomberg
Simon Battlogg

YOU ARE HERE

APPENDIX

Richmond Homes
Tom Simonds-Gooding

Serafim Fastigheter
Rickard Jacobsson

St. Modwen
Sarwjit Sambhi

Technical University of Madrid
Mauricio Pedraza Ruiz

Tredje Natur / Byggesocietet
Ole Schrøder

RICS
Prof. Dr. Michael Trübestein

SIGNA
Jörg Krane

Stockholm Business Region
Staffan Ingvarsson

Teichmann & Compagnons
Richard Teichmann

TREUCON Real Estate
Thomas Doll

Risanamento SpADavide Albertini Petroni

SILVIP
Luís Carita

Stoneweg
Jaume Sabater

Telereal Trillium
Graeme Hunter

Trevian Asset Management
Jussi Raitaniemi

Round Hill Capital
Jukka HelminenSjælsø Management &Balder Danmark
Flemming Joseph Jensen

Stratageeb
Giles K Bailey

TEMES
Dendrinos Evgenios

Tribeca Capital Partners
Philip Walravens

Swiss Life Asset Managers
Mario Holenstein
Paolo Di Stefano

Témpore Properties
Nicolás Díaz Saldaña

Tristan Capital Partners
Andrea Amadesi
Simon Martin
Dr. Constantin PlengeSaïd Business School,
University of Oxford
Andrew Baum

SkanskaElżbieta Rotblum
Arkadiusz Rudzki

Savills
Eri Mitsostergiou
Nicky Wightman

Société Foncière Lyonnaise
Pere Viñolas Serra

Swiss Prime Site
Markus Waeber
René Zahnd

Savills Investment Management
Cristiano Ronchi

Sonae Sierra
Thanos Efthymiopoulos

Swiss Re
Timour Boudkeev

Schroders
Sophie van Oosterom
SEGRODavid Sleath
Self-employed
Dr. Silvia Wustinger-Renezeder

SORAVIAThomas Bauer
Speakers for Good
Ruud Veltenaar
Spruce Holding
Carl Michael Augustsson

The Good Economy
Sarah Forster
Thylander Group
Kristian Krogh
Lars Thylander

Swissroc Group
Cyril de Bavier
Syntrus Achmea
Boris van der Gijp
TAG Immobilien
Martin Thiel

Tritax Group
Colin Godfrey
Nick Preston

Titania Holding
Anders Söderlund

UBS
Brice Hoffer
Reto Ketterer

The Office Group
Charlie GreenULI Ireland
Andrew Kinsella

Torre
Michele Stella

ULI Portugal
Francisco Rocha Antunes
Unibail-Rodamco-Westfield
Jean-Marie TritantSensible Capital
Silvia Rovere

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APPENDIX

Union Investment
Henrike Waldburg

Weber & Co.
Klaus Pfeiffer

USAA Real Estate
Justin Hildebrandt

Wereldhave Belgium
Nicolas Beaussillon

VailogEric Veron

WeWorkSandeep Mathrani

Valor Real Estate Partners
Korbinian Kirchner

wieninvest
Alexander Widhofner

Value One
Kerstin RobauschWillhemPeter Malmén

Value Retail
Scott D Malkin

Wolf Theiss
Birgit Kraml

Vasakronan
Johanna Skogestig

Woonplus Schiedam
Emilie Klep

VastnedReinier Walta

Yoo Capital Investment Management
Lloyd Lee

Vaudoise Assurances
Olivier Dessauges

ZEITGEIST Asset Management
Maximilian Mendel

VestedaAstrid Schlüter

Zurich Insurance Company
Cornel Widmer

VS Homes
Viola Schritter

8G Capital Partners
Tassos Kotzanastassis

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APPENDIX

Sponsoring
Organisations,
Editors and Authors

Thomas Veith
PwC Global Real Estate Leader & German
Real Assets Leader
Jean-Baptiste Deschryver 				PwC EMEA Real Estate Leader
Angus Johnston
PwC UK Real Estate Leader
Gareth Lewis
PwC ETRE Global and EMEA Leader

About PWC
PwC’s real estate practice assists real estate investment
advisers, real estate investment trusts, public and private
real estate investors, corporations, and real estate
management funds in developing real estate strategies;
evaluating acquisitions and dispositions; and appraisingand valuing real estate.
Its global network of dedicated real estate professionals
enables it to assemble for its clients the most qualified
and appropriate team of specialists in the areas of capital
markets, systems analysis and implementation, research,accounting, and tax.

www.pwc.com

Yanni Toum & Nana Duah Poku
PwC ETRE Project Managers

Richard Jones 						PwC Real Estate Leader, Czech Republic
Constantinos Constantinou				PwC Real Estate Leader, Cyprus
Søren Thorvaldsen Svane Keller 			PwC Real Estate Leader, Denmark
Jeroen Bus 							PwC Real Estate Leader, Finland
Geoffrey Schmitt
PwC Real Estate Leader, France
Fredy Yatracou 							PwC Real Estate Leader, Greece

Participating EMEA PwC Real
Estate Territory LeadersPeter Fischer							PwC Real Estate Leader, Austria
Grégory Jurion
PwC Real Estate Leader, Belgium
Geoffroy Jonckheere
PwC Real Estate Deals Leader, Belgium

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Dr. Csaba Polacsek
PwC Real Estate Leader, Hungary
Joanne Kelly 							PwC Real Estate Leader, Ireland
Lia Turri 							PwC Real Estate Leader, Italy
Amaury Evrard 						PwC Real Estate Leader, Luxembourg

NEXT

Lauren Williams 		PwC EMEA Real Estate Communication
Leader, Luxembourg
Serge de Lange
PwC Real Estate Leaders, Netherlands
Elin YoungPwC Real Estate Leader, Norway
Kinga Barchon
PwC Real Estate Leader, Poland
Jorge Figueiredo
PwC Real Estate Leader, Portugal
Richard Garey 				PwC Real Estate Leader, Spain
Helena Ehrenborg
					
PwC Real Estate Leader, Sweden
Sebastian Zollinger			PwC Real Estate Leader, Switzerland
Ersun Bayraktaroglu 					PwC Real Estate Leader, Turkey

YOU ARE HERE

APPENDIXPwC Research
Alison Blair, Research Leader
Gillian Kane, Principal Insight Consultant
Paul Irwin, Senior Insight Consultant
Eloise Corner, Senior Insight Associate
Mahasweta Chatterjee, Insight Associate

Ron Pressman
Global Chief Executive Officer
Urban Land Institute

About the Urban Land Institute
The Urban Land Institute is a global, member-driven
organisation comprising more than 46,500 real estate andurban development professionals dedicated to advancing
the Institute’s mission of shaping the future of the built
environment for transformative impact in communities
worldwide.
ULI’s interdisciplinary membership represents all aspectsof the industry, including developers, property owners,
investors, architects, urban planners, public officials, realestate brokers, appraisers, attorneys, engineers, financiers,
and academics. Established in 1936, the Institute has apresence in the Americas, Europe, and Asia Pacific regions,with members in 81 countries. ULI has been active in Europe
since the early 1990s and today we have nearly 5,000
members and 15 National Councils.
The extraordinary impact that ULI makes on land use
decision making is based on its members sharing expertiseon a variety of factors affecting the built environment,
including urbanisation, demographic and population
changes, new economic drivers, technology advancements,and environmental concerns. Drawing on the work of
its members, the Institute recognises and shares bestpractices in urban design and development for the benefitof communities around the globe.

Lisette van Doorn
Chief Executive Officer
Urban Land Institute Europe

Editorial Oversight Committee
Kari Pitkin, Allianz Real Estate
Cristina García-Peri, Azora
Kelly Russell, Coima
Dorota Wysokinska-Kuzdra, Colliers
Rikke Lykke, DEAS Group
Brian Klinksiek, LaSalle Investment Management
Marco Fok, Mileway
Tinka Kleine, PGGM
Greg Kane, PGIM Real Estate
Brice Hoffer, UBS Asset Management
Henrike Waldburg, Union Investment

Sophie Chick
Vice President, Research & Advisory Services
Urban Land Institute Europe
Joey Udrea
Manager, Research & Advisory Services
Urban Land Institute Europe
Tevan Lee
Associate, Research & Advisory Services
Urban Land Institute Europe
Editorial team
Doug Morrison, Editor
Tim Horsey, Author
Isobel Lee, Author
Mike Phillips, Author
Lucy Scott, Author
Stuart Watson, Author

europe.uli.org.

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Emerging Trends in Real Estate® is a registered trademark of PricewaterhouseCoopers LLP (US firm) andis registered in the United States and European Union.
© November 2022 by the Urban Land Institute and PwC. All rights reserved. PwC refers to the PwC
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Recommended bibliographic listing: PwC and the Urban Land Institute. Emerging Trends in Real Estate®
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