YOUAREHERE

CONTENTS

CONTENTS

CHAPTER2

ENVIRONMENTAL

WELCOME

EXECUTIVESUMMARY

CHAPTER1

CHAPTER3

REALESTATE&

CAPITALMARKETS

CHAPTER4

SECTORSTOWATCH

&SOCIALIMPACT

BUSINESS

ENVIRONMENT

CHAPTER7

APPENDIX

CITYPROSPECTS

CHAPTER6

CITIESTOWATCH

CHAPTER5

20YEARS

ABOUT

THEREPORT

OFEMERGING

TRENDSEUROPE

EXECUTIVESUMMARY

YOUAREHERE

EXECUTIVE

SUMMARY

“Weareonthecuspofquiteasignificant

slowdown,bothintherealeconomyand

intheunderlyingrealestatemarkets.”

Pan-Europeaninvestmentmanager

MADRID,SPAIN

PREVIOUS

NEXT

CONTENTS

EXECUTIVESUMMARY

ZURICH,SWITZERLAND

YOUAREHERE

TheoutbreakofwarinUkrainehascastalongshadowoverEurope,andrealestate,likeeveryotherindustry,willhavetodealwiththeeconomicandpoliticalfalloutfortheforeseeablefuture.

Whiletheindustryleaderscanvassedforthis20theditionofEmergingTrendsinRealEstate?EuropereportlittledirectimpactontheirpropertyportfoliosfromRussia’sinvasionofUkraine,thewar’sconsequencesareseeninsurgingenergycosts,historicallyhighinflationand,latterly,risinginterestrates.Sevenoutof10surveyrespondentsbelieveEuropewillmoveintorecessionbeforetheendof2022.

Thesurveyandtheinterviewswereconductedinthesummerand,ifanything,theprospectsfortheEuropeaneconomyandrealestatemarketshavebecomeevenmoreuncertaininthemonthsleadinguptopublication.

Themoodisinstarkcontrasttolastyear’sreportwhentherewasstillaCOVID-inspiredsolidarityamongEuropeancountriesaswellasacoming-out-of-lockdownpeakinbusinesssentiment.Europenowappearsfarmoreunsettledbythepressuresofenergysupplyandinternalpolitics,whichisaddingtotheoveralluncertaintyforinvestors.

Muchdependsontheseverityanddurationoftheexpectedrecession,andasintervieweespointout,theeconomiccircumstancesandmarketconditionsbehindpreviousdownturnsareallquitedifferentfromwhatEuropeisexperiencingtoday.

Thoughthecityrankingshaveafamiliarlook—LondonretainsthetopspotwhileParistakesoversecondplacefromBerlin—theoverallinvestmentanddevelopmentprospectsforall30citiescoveredbyEmergingTrendsEuropehavedeclinedsincelastyear’ssurvey.

Eveninvestors’othercustomarysafehavensinGermany,Frankfurt,MunichandHamburg,donotenjoythesameunwaveringpositivesentimentaspreviousyears,reflectingthepotentialimpactofinflationonEurope’slargesteconomyanditsdependencyonRussiangassupplies.

Despitetheprevailinguncertainty,leasingactivityacrossEuropeheldupreasonablywellformuchof2022.Butthereisawidespreadbeliefthathighenergypricesandarecessionwillleadtooccupanciesandrentsfalling,eveninpreviouslyrobustsectors.Itisclearthat2023willbeatoughyearinanyevent,andassomeindustryleaderscontend,arecoverymaynotemergeuntilearly2024.

PREVIOUS

NEXT

CONTENTS

Unsurprisingly,confidenceintheavailabilityofequityanddebtoverthecomingyearhassunktoitslowestlevelsincetheglobalfinancialcrisisalthoughitisunlikelythatliquiditywilldisappearaltogether.Developmentactivityslowedin2022andisexpectedtofallsharplyin2023.

Asasignofthetimes,newenergyinfrastructuretopsthesectorrankingsforthesecondsuccessiveyear,partlyreflectinghistoricallyhighenergypricesandtheprospectofshortagesoverwinter.Thissectorcoversawiderangeofrealassets,suchassolar,wind,energystorageandelectrictransportinfrastructure.Itstoprankingisalsopartofawider,longer-termtrendinwhichinvestorsrebalanceholdingsawayfrommainstreamrealestatetowardsalternativesectorsthatwillbenefitfromthemegatrendsofdemographics,climatechangeandtechnology—andstronger,non-cyclicaldemand.

Itisnotablethatvariousformsofhousingdominatethetop10picksfromsurveyrespondents—astheyhavedoneforseveralyears—despiteincreasedconcernsoverpoliticalriskinthissector.Onabroadlevel,thereisanacceptancethatthebalancebetweenresidentialsupplyanddemandinEuropeanmarketshasnotchangedinthepastyear,anditisunlikelytochangeanytimesoon.

PREVIOUS

CONTENTS

NEXT

YOUAREHERE

EXECUTIVESUMMARY

Thebigfearisoverthepressureonrealestatevalues,whichhasbeenwellsignalledinthelistedsectorasdiscountstonetassetvaluecontinuetodeepen.Directpropertyvaluesstartedfallingin2022andafurtherdeclineisnowregardedasinevitable,withthepricingbetweenprimeandsecondaryrealestateexpectedtowiden.

Someofthatconcernhasledtologistics,theone-timestarperformer,slippingdowntheoverallrankingsalthoughitstillstandsatseventhplaceintermsofprospectsforinvestment,andsixthforrentalgrowth.Butasectorthathasseenyieldscompresstohistoriclows,sub-3percentinmanymarkets,isparticularlyexposedwhenvaluesfall.

Manyseniorpropertyprofessionalsbelievethatinflationwillpeakatsomepointin2023andbringclarityoverhowmuchcentralbanksarelikelytoraiseinterestrates.Assetsmightbeworthlessatthatpoint,buttherewouldbemoredirectionoverwherevaluesarelikelytosettle.

Yetindealingwiththeimmediatedisruptiontomarketstheindustryappearstoacknowledgethatitmustcontinuetoevolveandrespondresponsiblytothelong-termstructuralchangestorealestateandthewiderchallengesaroundenvironmental,socialandgovernanceissues.

Nearly90percentofrespondentshighlighttheimportanceofcreatingsocialimpactalongsidefinancialreturnoverthenext20years,while60percentidentifytheimportanceofincreasingdiversityintheirorganisations.

Thechallengeisalwaysaligningactionswith

suchlaudableambitions,andevenmoresoina

yearwhenissuesaroundenergyefficiencyand

supplyhaveaffectedeveryEuropeanhousehold

andwheneconomicconstraintsthreatento

obstructthepathtonetzero.Realestate’sefforts

herehavearenewedcriticality.

Nonetheless,aseachyeargoesby,property

professionalsarethinkingmuchmoreabouthow

theindustryconductsbusinessandaboutthe

sortofrealestatethatwillbe“fitforpurpose”

forthelongterm.Tomark20yearsofEmerging

TrendsEuropewehaveaskedabroadrange

ofindustryplayerstoexploresuchthemesand

howtheymaydefinerealestateoverthenext

20yearswhilereflectingonthemanymarket

changesthathaveshapedtheindustrytodate.

AssetoutinChapter7,theindustry’smove

towardsaformof“responsiblecapitalism”over

thenext20yearsisdrivenbymanyfactorsbut

aboveallbytheclimatecrisis.Itisonetrendthat

hasonlygainedinprominenceandrelevance

throughoutEmergingTrendsEurope’shistory,

connectingthepast,presentandfuture.

Globalisationwasatremendouswealthcreatorintheworld,anditisgoingintoapauseoraslightreverse.Theimplicationforrealestateisthatit'snolongertherisingtidethatsailsallboats.It'sgoingtobeaboutwhereyoucandifferentiatethroughbeingsmartratherthanjustthroughscale.

Globalinvestmentmanager

LONDON,UK

BUSINESSENVIRONMENT

YOUAREHERE

CHAPTER1

BUSINESS

ENVIRONMENT

“Asinvestors,wearefacingnotonlypurely

economicissuesbutalsogeopoliticalones

thatusedtobeinterestingtounderstandbut

areactuallynowhavingasignificantimpact

onoureconomies.”

Headofstrategy,privateequityfirm

FRANKFURT,GERMANY

PREVIOUS

NEXT

CONTENTS

BUSINESSENVIRONMENT

Therewillbeachangeinvaluationsdrivenbyhigherinterestratesandachangeinrelativepricingbetweenprimeandsecondaryrealestate,assoonasrecessioncomes.

PARIS,FRANCE

YOUAREHERE

Ifthethirdyearofthepandemicwassupposedtousherinsignsofhope,theoutbreakofwarinEuropehasdelayedrecoveryandexposedsignificantstructuralweaknessesintheeconomic,socialandpoliticalfabric.

EmergingTrendsinRealEstateEurope

2023findsthepropertyworldstallingatanuncomfortablecrossroads,asrisinginterestrateshitchedtosoaringinflationdragEuropetowardsrecession.

Summingupthemoodacrosstheindustry,oneIrishpropertyleadersays:“Europeisinforaverygrimwinter.”

Followingabrief,COVID-inspired,showofsolidarity,Europehasbecomemoreunsettledbythepressuresofenergysupplyandinternalpolitics.Statesareevenchidingeachotherfortheireconomicshort-sightednessovertheirrelianceonRussiangasandhaverepeatedlyfailedtoreachaconsensusontheissue.

Aglobalheadofinvestmentmanagementnotesthatthedifferencesareattimes,stark:“Ifyou’resittinginGermanyortheUK,allofasuddenenergyisahugesubject,whereastheFrench,benefitingfromnuclearpower,mightbeasking,where’stheproblem?”

Butright-wingelectionsuccessesinSwedenandItaly,anewPrimeMinisteroftheUKanduncertaintyinFranceallsuggestthatfurtherupheavalislikelyacrossthepoliticallandscape.

TheEuropeanCommissionwillundoubtedlyfaceatougherrideinachievingunanimousdecisions.

SaysoneGermanCEO:“JustlookatsleepyandcomplacentGermany.Ibelievetheheatwearefeelingnowisactuallytriggeringsomeneededreformsthatwecouldn’thavegottenagriponwithoutthoseexternalforces.”

WhilethoseinterviewedforEmergingTrendsEuropereportlittledirectimpactontheirpropertyportfoliosfromtheUkraineconflict,thewar’sconsequencesareeverywhere.“It’simpossibletosaywehaven’tbeenaffectedbythewar.Justlookatenergycosts,inflationandinterestrates,”notestheCEOofapan-Europeandeveloper.

Theresultantaffordabilitycrisisandrecessionrisk—theeffectsofwhicharelikelytoimpactallsectorsinonewayoranother—haverobbedtheindustryoftheclear“safe-haven”sectorsaffordedbythefirsttwoyearsofCOVID-19,suchasresidentialandlogistics.Inthefaceofincreasinglyexpensivedebt,propertyprofessionalsperceivethateventherelativeincomesecurityofferedbyoperationalassetsisgoingtorequiregreatereffortandingenuity.Manyarewaitingforclarityonpricingandyields.

"Therewillbeachangeinvaluationsdrivenbyhigherinterestratesandachangeinrelativepricingbetweenprimeandsecondaryrealestate,”suggeststheheadofinvestmentstrategyofapan-Europeaninvestor.

PREVIOUS

NEXT

CONTENTS

Thelistedsectorisalreadybearingthebruntasdiscountstonetassetvalue(NAV)continue todeepen,withanumberoffirmsexploringthe“takeprivate”route.Italy’sCoimaisarecentexample,delistingafterjustsixyearsonthe stockmarket.Butthepressureisnotlimitedto firmsspecialisinginassetsundulyaffectedby thecurrentcrisis–eventhemanagingdirectorofaprofitablelogisticsgroupnotesthat“l(fā)ikeeveryone,oursharepricehasdroppedfairly significantly”.

Investorsdonotlikeuncertainty.WhilemanytookanearlysummerbreakinthehopeofresumingbusinessasusualinSeptember,theinvestmentclimatehascontinuedtodeterioratesignificantly.Now,manytransactionsareonholdasfearshavecrystalisedintoclaritywithborrowingcostshigherthantheyhavebeeninageneration.

Althoughrealestatecompaniesarenotasleveragedastheyweregoingintotheglobalfinancialcrisislargelyduetotheregulatorychangesofthepastdecadeandahalf,double-digitinflationinsometerritories—andthespectreofstagflation—continuetoweakeninvestordemandgoinginto2023.

%increase

YOUAREHERE

BUSINESSENVIRONMENT

“Allmarketparticipantsareactingverycarefully,soliquidityisgoingdown.Iexpecttransactionvolumestofalloffquiteseverely,”saysaglobalheadofinvestmentmanagement.

Thefocusonenvironmental,socialandgovernance(ESG)issuesisclearlystillimportanttotheindustry,althoughtheclimatedebatehasinpartbeendrowned-outbythesirencallofmacroeconomicwoes,withconstructioncostsinflatedbycongestedsupplychains.Yetasconsumerandindustryfearsaroundaffordabilitymatterssoar,realestatehasanopportunitytodovetailsocialimpacteffortsandenvironmentalstewardship–andtacklethematerialsandenergycrisis–witharadicalapproachtosustainability.PreviouseditionsofEmergingTrendsEuropehavefoundindustryprotagonistsreframingrealestateas“socialinfrastructure”.Manyintheindustrybelievethetimetomakegoodonthatclaimhasarrived.

Saysaglobalinvestmentstrategychief:“Newdevelopmenthassloweddown,refurbishmenthassloweddown,butdespitethis,theESGcommitmentsthatwehaveallmadeforthenextfewyearswillhavetobeundertaken.”

Allmarketparticipantsareactingverycarefully,soliquidityisgoingdown.Iexpecttransactionvolumestofalloffquiteseverely.

Figure1-1Realestatebusinesssentiment,2011-2023Source:EmergingTrendsEuropesurvey2023

60%

50%

40%

30%

20%

2011201220132014201520162017201820192020202120222023

BusinessconfidenceBusinessprofitabilityBusinessheadcount

Realismsupersedesoptimism

Thesurveysignalsadeclineinprofitsandconfidencein2023,reflectingacautionarymoodacrosstheindustry.Thisismarkedlydifferenttolastyear,whentherewasacoming-out-of-lockdownpeakinsentiment.

“Theavailabilityofbothequityanddebtcapitalhasdeclined.Investorshavebecomemore

selectiveandbankshavebecomemoreriskaverse,”notesaglobalheadofrealestateinvestment.

However,whiletheproportionexpectingbusinessconfidence,profitabilityandheadcounttoincreasehasfallencomparedwith2022,theoverallshareisstillhigherthaninyearoneofthepandemic.Headcountremainsthemostpositiveindicatorwith56percentofrespondentsexpectingnumberstoremainthesame.

Theresultssuggestthatthecurrentlytightlabourmarketsareonthewholedrivingastaffretentionpolicywithonly10percentofrespondentsenvisaginglettingpeoplego.

“Wehavealackoflabourforces,andwehavepressureonsalariesandwages,whichneverhappenedinthemiddleofarecessionbefore,”saysapan-EuropeanrealestateCEO.

PREVIOUS

NEXT

CONTENTS

YOUAREHERE

BUSINESSENVIRONMENT

Evenso,Europeanrealestatefacesamajorchallengefromaquartetofinter-linkedeconomicheadwinds,andthereisanoticeableincreaseinconcernfromindustryleaderscomparedwith

2022.

Worriesoverinflation,interestrates,Europeanandglobaleconomicgrowthareallsharplyuponlastyear—andeventhen,theywerestartingtoalarmamajorityofrespondents.Butthistime,thereisalmostcompleteconsensusthatinflationis“concerning”—accordingto

91percentofindustryleaders.Thiscontrastsmarkedlywith2022whenthegreatestconcernwascybersecurity,accordingtojusttwo-thirdsofrespondents.

“It’sverydifficulttostaycompetitiveinthisinflationaryenvironment,”concludesaroundtableofULImembersinBelgiumandLuxembourg.

Onlyafewperceiveanupsidetotheinflationissue.“Ifmoneybecomesworthless,existingmoneywillbeinvestedmoreinrealestate.Highearnersarestillbuyingpropertyasaninflationhedge,”accordingtoapanelofAustrianpropertyprofessionals.

Unsurprisingly,interestratesfollowcloselybehindasachiefconcernon89percent,whilesluggishEuropeangrowthisanotherredflagfor88percentofrespondents.Downturnrisksintheglobaleconomyaresignificantfor81percentofrespondents–twiceasmanyaslastyear.

Ifmoneybecomesworthless,

existingmoneywillbeinvested

moreinrealestate.Highearners

arestillbuyingpropertyasan

inflationhedge.

“Europehaslittlegasandoil,whichismaking

energyexpensive.Theriskisthatlocations

acrossthecontinentwilllosetheirattractiveness

forindustrialandcommercialproduction,and

internationalcompanieswillbethefirsttoleave,”

warnsaglobalheadofrealestate.

“Wereallymustgetagrip.Wecan’trelyon

Chinaforoureconomy,ontheUSforour

nationalsecurity,andonRussiaforourenergy,”

statestheCEOofapan-Europeandeveloper.

InAugust,USpresidentJoeBidensigned

theInflationReductionActintolaw,apolicy

designedtoreducethecountry’sdeficitwhile

potentiallyeasingconsumerspendingon

healthcare.Notably,ithasalsobeencalledthe

largestclimateinvestmentinUShistory,with

severalprovisostoincreaseenergysecurity.It

willlargelybepaidforbycorporations.

TheEUandUKresponsehasincludedthe

centralbanksofbothraisinginterestrates.

Source:EmergingTrendsEuropesurvey2022

Overall%concerned

Figure1-2TheEuropeanbusinessenvironmentissuescausingconcernin2023

2023

Inflation

91%

Interestratemovements

89%

Europeaneconomicgrowth

88%

Globaleconomicgrowth

81%

Currencyvolatility

49%

Cybersecurity

48%

Businessliquidityissues

37%

Deglobalisation

35%

Suddenshiftsinconsumerdemand

33%

Managementoftheworkforce

32%

Digitaltransformation

28%

Businessinterruption

25%

very

concerned

Notatallconcerned

Veryconcerned

Neither/nor

Not

Somewhatconcerned

2022

59%

55%

50%

43%

30%

67%

30%

27%

27%

44%

42%

55%

2021

29%

28%

90%

87%

35%

54%

62%

40%

40%

70%

41%

80%

Source:EmergingTrendsEuropesurvey2023

PREVIOUS

NEXT

CONTENTS

BUSINESSENVIRONMENT

Figure1-3

Europeanbusinessenvironment

concernsfor2023andoverthe

nextfiveyears

Inflation

91%

89%

73%

Europeaneconomicgrowth

88%

76%

Currencyvolatility

Cybersecurity

Deglobalisation

Digitaltransformation

Note:Combinedpercentageof“concerned”and“veryconcerned”respondents.

Source:EmergingTrendsEuropesurvey2023

Interestratemovements

48%

48%

Next3-5years

13%

YOUAREHERE

28%

49%

39%

38%

34%

35%

2023

Asitannouncedarecordriseof75bpsinSeptember,theEuropeanCentralBankstatedthat“agradualbutsustainedpathoffurtherincreasesininterestrateswillbeappropriate”.

Whiletheinflationaryriskishighlightedbysurveyrespondentsandinterviewees,theyalsoexpressgraveconcernsabouttheimpactonbusinessofrisinginterestrates.

“Thefactthatinterestratesshotupandbecamevolatileandunpredictablehasn’thelpedtheinvestmentmarket,”saysonerealestatefundmanager.

NearlythreequartersofsurveyrespondentsbelieveEuropewillmoveintorecessionbefore2023,furthercementingthehittodevelopmentactivityprovokedbythelasttwoyearsofsupplychainwoes,increasinglyhighborrowingcostsandagenerallackoffinancing.GermanyandtheUKlookunlikelytoescapethisfate,whilecountriessuchasFranceandSpainaremoreinsulatedthantheirneighbours,largelyduetohowtheysourceenergy.

Severalrespondentsflagthecentralityofenergysecurityasapredictorofrecessionorattheveryleast,aneconomicslowdown.

OneGermanmanagingdirectorvoicesthewidespreadfearoverGermany’sfateshouldRussiaturnoffgaspipelinespermanently.“IfPutinreallycutsoffthegassupply,Iwouldassumethatwe[inGermany]areendingupinlockdownsagain.

Or,let’ssay,closuresofcertainpartsofbusiness,whichareprobablynotsystemrelevant.”

Duetothefracturednatureoftheenergysecurityissue,however,viewsonrecessionriskvaryacrossEurope.Accordingtothesurvey,recessionisverylikelybefore2023for83percentofrespondentsinGermany,82percentintheUK,79percentintheNetherlands,and68percentinSpain.Incontrast,Italian(50percent)andFrench(45percent)respondentsaremoresanguine.

“Thekeyisgoingtobehowlongarewegoingtolivewithhighinflationandhighrates,becausethesetranslateintoarecessionandcanfurthertranslateintostagflation,”saystheCEOofaSpanishrealestatefirm.

ANetherlands-basedmanagingdirectoradds:“Idon’tthinktherewillbeadeeprecession,buttheremaywellbetwoorthreequartersof slowdown.”

Overthenextfiveyears,theindustryindicatesasimilarlevelofconcernovermanyofthekeybusinessissues,withEuropeaneconomicgrowth(76percent)andinterestrates(73percent)inpoleposition,followedbyglobaleconomicgrowth.

“Iwouldthinkthere’sdefinitelygoingtobeaslightlymorechallengingbusinessenvironmentforthenextthreetofiveyears,”

notesaseniormanagementfigureataprivateequityfirm.

PREVIOUS

NEXT

CONTENTS

Thefactthatinterestratesshotupandbecamevolatileandunpredictablehasn’thelpedtheinvestmentmarket.

Theexceptionhereisinflation:asinterestratesrise,just13percentofrespondentsareconcernedaboutitsmedium-termimpact.

AUK-basedglobalrealestateheadexplains:“WeforecastthatinflationrateswillremainelevateduntilQ1ofnextyear,andthentaperofftoaround2percent,2.5percentoverthe remainingwindow.Interestratesshouldbe similar.”

AEurope-basedheadofinvestmentstrategy foraglobalrealestatefundisalsooptimistic:“Ithinkinflationisgoingtopeakrelatively soon.Itwillprobablypeakatsomepoint inthenextthreetosixmonths.Oilpriceshavealreadygonedownandthemarketisexpectinginterestratestopeakprobablyby theendof2022,maybe2023,andthengodown,triggeredbyarecession.”

64%

55%

53%

42%

48%48%

Environmental

sustainability/

Availabilityof(re)finance

Availabilityof

suitableassets/land

foracquisition&

development

YOUAREHERE

BUSINESSENVIRONMENT

Buildingasustainablefuture

Despitethemacroeconomicuncertainty,environmentandsustainabilitystrategiesremainkeyprioritiesformostindustryleadersin2023.Formanyofthem,climateriskrepresentsthebiggestchallengefacingrealestate.

“ThereisnosinglediscussionyouwillhavewithanypeerinrealestatethatdoesnotendupreferencingESGanddecarbonisation,”saysaEuropeanheadofassetmanagement.

Theenvironmentwillbeasignificantissueformorethanhalfofpropertyprofessionalsinthecomingyear.Thesurpriseisthat45percentofrespondentsdonotregardthisasaconcern

today,althoughthiscouldtieintotheirlonger-termobservations.Indeed,64percentofrespondentsseesustainabilityrequirementsandregulationsasakeyconcernoverthenext3to5years.

Thosewhoarelessconcernedsuggesttheyhavemoreurgentpriorities.“Theshort-andmedium-termconcernsarethemarket’sinflationarytendencies.Inthelongterm,theissueistheenvironment,”saysarealestateinvestmentmanager.

ThelikelihoodofgreaterregulationshapingESGhasbeenarecurringthemeinEmergingTrendsEuropeoverseveralyears,butthistimethesurveysuggestsastep-changeinitsimportance

totheindustry.Halfoftherespondentsregarditasanissueforthecomingyearandevenmoreso,60percent,forthemediumterm.

Foronepan-EuropeanCEO,thisemergingtrendislongoverdue.“Wecreatedalotofnewrulessuchasthosegoverningtaxonomyinthelastfewyears,whichmanysawasanotherlayerofbureaucracy,ratherthananewwayofconsideringouroverallcontributionandthenecessary,anddeeptransformationtowardsamuchmoresoberwayofdoingbusiness.”

Thereisnosingle

discussionyouwillhave

withanypeerinreal

estatethatdoesnotend

upreferencingESGand

decarbonisation.

Figure1-4Realestatebusinessissuesin2023andoverthenextfiveyearsNote:Combinedpercentageof“concerned”and“veryconcerned”respondents.

92%

76%

Constructioncosts

2023

Next3-5years

84%

73%

Availabililtyof

resources

60%

51%

Increasedregulation(national/international)

decarbonisation

requirements

PREVIOUS

NEXT

CONTENTS

44%

37%

Asset

obsolescence

31%33%

Covenant&loan

servicingissuesfor

existingloans

Source:EmergingTrendsEuropesurvey2023

YOUAREHERE

BUSINESSENVIRONMENT

However,respondents’toptworealestateissuesfor2023areconstructioncosts(92percent)andavailabilityofresources(84percent)inthelightofmaterialsandlabourshortagesandrelatedinflationarypressures.Whileconstructioncostshavebeenatornearthetopofindustryconcernsforyears,supply-chainissuesthatstartedduringthepandemichavebeenexacerbatedbywarinUkraine,withfuel,copperandaluminiumparticularlyaffected.RussiaandUkrainearealsokeyexportersofspecialitymetals,andtheconflicthascausedsignificantdisruptionoflabourintheconstructiontrade.

“Higherconstructioncostsaredowntotwothings.Highcommodityandfuelprices,butalsosupplychaindisruptions,”suggestsonerealestatestrategyhead,beforenotingthatthelatter“arestartingtoease”.

Yetthesurveyindicatesthatsignificantimprovementsontheconstructionfrontareunlikelyinthecomingthreetofiveyears.

Aroundthreequartersofrespondentsbelievethatconstructioncostsandavailabilityofresourceswillremaintopofthelistofconcernsoverthatperiod.

“Thewholeissueofconstructionisactuallyveryhotatthemoment,andanyonewhohastobui