Emerging Trends in Real Estate® 2022

Road to recovery

Post-pandemic confidence in the real estate sector is at its highest level since 2014, and profound changes are expected as a result of changing consumer demands, digitalisation and an increasing focus on the ESG agenda.

Emerging Trends in Real Estate® Europe 2022 reveals a significant leap in confidence among European real estate sector leaders in the year ahead. But the longer-term outlook is characterised by uncertainty with many still coming to terms with the radical changes brought about or accelerated by COVID-19. 

This report - the 19th annual survey by the Urban Land Institute (ULI) and PwC - is based on the views of 844 property professionals. It records the highest levels of business confidence since 2014 and a doubling in positive outlook compared with the same time last year. Short-term optimism reflects the broad sense of relief that the industry remained resilient during the pandemic and that real estate remains a favoured asset class. Around half of respondents think that business confidence (52%), profitability (49%) and headcount (53%) will rise in 2022.

 

For many this means the performance of real estate looks relatively strong for 2022 with higher forecast returns than a year ago. This level of confidence is further supported by continuing strong investor demand. The availability of debt and equity is expected to be plentiful  albeit with significant differences between sectors, depending on which performed well during the pandemic and those that suffered significantly.

European cities overall prospects 2022 - top ten

London comes top overall for investment and development prospects for 2022 in European city rankings, benefiting from the depth of its market, undoubted gateway status and yield gap in the office sector roughly 1% greater compared to the continent. Berlin, in second place, shares the robust economy and transparency of the other German cities in the top 10, while having its own distinct appeal, particularly for international investors. Like last year, Paris ranks third, reflecting its gateway status.

Overall ranking
2022 (2021)
Cities
1 (2) London
2 (1) Berlin
3 (3) Paris
4 (4) Frankfurt
5 (7) Munich
6 (8) Madrid
7 (5) Amsterdam
8 (6) Hamburg
9 (13) Barcelona
10 (12) Brussels

“Brussels has entered the top 10 of most interesting cities in terms of real estate prospects in Europe, up from 12th place in 2021. This move was helped by its location at the heart of Europe, a resilient stock and yields which even increased during the COVID-19 pandemic for core assets. Brussels is also often perceived as having a young and innovative profile. On the other hand, there is some concern among investors about excess office capacity in the city, as many big corporates are reducing their footprint, and following the European Commission’s announcement in May that it plans to close half its 50 office buildings across Brussels by 2030.”

Grégory Jurion, Partner and Real Estate leader at PwC Belgium

Sector prospects in 2022 - top ten

The pandemic has reinforced the trend of investors targeting sectors that profit from megatrends, operate anti-cyclically, and continue to generate resilient income. From a traditional sector perspective, this favours logistics and most forms of housing, although investors are aware that housing remains politically sensitive. However, it is the niche sectors that have dominated the top end of the list even though they are currently a small part of the market. New energy infrastructure topped the sector rankings followed by life sciences with data centres also garnering enthusiasm among investors.

Overal rank Sector
1 New energy infrastructure
2 Life sciences
3 Logistics facilities
4 Data centres
5 Healthcare
6 Retirements/assisted living
7 Industrial/warehouse
8 Adfordable housing
9 Self-storage facilities
10 Private rented residential

At the same time, there is no consensus yet on the future of offices, with some respondents enthusiastic about the future of flexible, prime assets, while others envisage an inevitable contraction in overall demand. There will be a lasting increase in time worked remotely, according to 85%, while 82% see a continuing role for HQ buildings in conveying culture and attracting talent and 74% see a growing valuation gap between primary and secondary offices.

The sector rankings clearly signal a longer-term and fundamental shift into more operational real estate that the industry is navigating while making the most of the immediate economic upturn. At the same time, it demonstrates a more granular approach to real estate investing, drilling down into the specifics of subsectors when making asset allocation decisions. 

“Having hopefully seen the worst of the pandemic, real estate businesses are looking forward with confidence. A major part of the recovery and future shape of the industry in Europe will be driven by the response to Net Zero and the ESG agenda more broadly. The challenges here are every bit as large as those associated with finding the post pandemic new normal. There is a great opportunity here for the industry to play a major role in finding new sustainable ways for how people live, work and interact with the built environment.”

Geoffroy Jonckheere, Partner, PwC Belgium

About Emerging Trends in Real Estate Europe 2022

Emerging Trends in Real Estate® Europe, a trends and forecast publication now in its 19th edition, is a highly regarded and widely read report in the real estate industry. Undertaken jointly by PwC and the Urban Land Institute, the report provides an outlook on investment and development trends, capital markets, cities, sectors and other real estate issues throughout Europe. Emerging Trends Europe 2022 reflects the views of 844 property professionals who completed surveys, were interviewed or took part in a series of roundtable meetings across Europe as a part of the research for this report. The interviewees and survey participants represent a wide range of industry experts, including investors, fund managers, developers, property companies, lenders, brokers and consultants.

About ULI 

The Urban Land Institute (ULI) is a non-profit education and research institute supported by its members. Its mission is to shape the future of the built environment for transformative impact in communities worldwide. Established in 1936, the institute has more than 45,000 members worldwide representing all aspects of land use and development disciplines.

ULI has over 4,000 members in Europe across 15 National Council country networks. For more information, please visit europe.uli.org, or follow us on Twitter, LinkedIn or Instagram.



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Grégory Jurion

Partner, Brussels, PwC Belgium

+32 476 42 39 16

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Geoffroy Jonckheere

Partner, Brussels, PwC Belgium

+32 475 91 08 29

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