in Real Estate ®
4 Maintaining balance
30 Sponsoring organisations
31 Interview participants
These forces are informing the current At the same time, there is a need for “ Operating skills and
round of consolidation among property- more diverse skills and expertise in the
owning companies, particularly in the retail real estate industry. The more progressive complexity are becoming
sector. Scale is important at this stage in businesses are hiring new specialists more important for
the cycle, but there is far more to it than in technology, customer relationships,
stock market M&A among companies and strategy/disruption. It is easy to
most if not all sectors.
of similar heritage. The lines between see why, given the risks for investors Of course, it’s still all
traditional real estate companies and of getting some of these calls wrong.
about location, but the
new entrants, mainly from the tech field, And there are numerous, game-changing
are becoming blurred. There is plenty of disruptions with timescales that extend operational management
opportunity for new entrants to disrupt the beyond conventional property cycles. is more and more
sector and steal value and market share,
which is why many of those interviewed The emergence of driverless cars – important in driving
believe that now is a crucial point in the no longer a fantasy scenario – is just one values. That’s much the
sector’s evolution. Those companies example of disruptive technology that has
unwilling or unable to embrace change polarised opinion in the real estate industry
same thing in how you
risk being left behind permanently. as to its impact. As the interviewees for operate retail and how
Global Emerging Trends all agree, these you operate a residential
There are two main reasons cited for this. are challenging times for an industry that
Huge amounts of capital are flowing into must somehow strike the right balance platform. Having the
the sector, and it will flow to the companies between risk management, innovation right operating platform
that can use technology to give themselves and entrepreneurship.
even the smallest edge. With real estate
is crucial to creating
late in the cycle, investors and owners value, which is why we
will need to utilise any means necessary
don’t just invest in the
to improve performance of assets –
or maintain performance during a downturn. assets, but also typically
The greater the sophistication, the easier try to buy into the
it will be to raise money and make money
in a crowded field. One related theme here operating companies.”
is the increased capex costs as owner-
European pension fund investor,
operators seek to keep their real estate
Global Emerging Trends in Real Estate 2018
relevant to occupiers – whether that’s
retail, office, logistics, or residential.
Real estate continues to attract capital, demonstrating its appeal “Prices are very high,
over other asset classes in an otherwise uncertain investment and in some markets,
world that is starting to betray signs of nervousness over inflation
and rising interest rates.
they are above pre-
crisis levels. What’s in
According to Real Capital Analytics (RCA), At this stage in the cycle, pricing of core
place for a prolonged
global volumes for completed sales of assets remains an issue around the world high level is the fact that
commercial properties totalled $873 billion although not necessarily something to operational performance
last year, matching the total registered cause alarm just yet, according to one
in 2016. A 6 percent rise in Asia Pacific global player. “If Paris is trading at sub-3 is still very strong.”
and an 8 percent increase in Europe offset percent, the fact that it is so low has been
a decline in the US, the world’s largest viewed by some investors that we are in Global investor,
Global Emerging Trends in Real Estate 2018
commercial real estate investment market. bubble territory. I don’t think we’re in
bubble territory at all. Assets are expensive,
Though the past two years rank behind and they may or may not correct, but it’s
2015 as the decade’s most active for entirely possible that we’re in a low bond
investment, the rising deal flow in Europe yield environment and the returns available
and record levels of activity in Asian markets, going forward are simply going to be lower
such as Hong Kong and Singapore, are than we’ve been used to in the past.”
nonetheless remarkable at a time when
real estate is universally acknowledged
to be late in its cycle.
Figure 1-1 Global capital flows 2017 ($ bn)
This late cycle period undoubtedly informs
the caution expressed by the industry 1,100
leaders canvassed for this global edition 1,000
of Emerging Trends. But they are also
900
reassured by the relatively strong macro-
economic outlook for most major markets 800
around the world, which is underpinning 700
occupier demand. If anything, the talk is of
600
real estate being in a prolonged late cycle.
500
“Real estate still offers a comparatively 400
attractive spread to bond yields across the
globe right now. But it’s more fundamental 300
US – smaller cities rising, Such a focus is not new – it is reminiscent “ The tax changes have
taxes falling of the shift in investor interest in the
2005–2007 period – but the staying power helped create some
Investors completed a total of $375.6 billion of secondary markets may be, not least clear momentum.
because they have avoided the level of
of transactions greater than $10 million in
overbuilding seen in previous cycles.
There are good reasons
the US during 2017, an 8 percent decline
from 2016 and the second successive year
to be optimistic on the
of falling investment, according to RCA. As one Emerging Trends Global interviewee
US despite the political
cautions, though, investors must resist
The slowdown in activity reflected a “a broad brush” approach to how they noise, although large
reassessment of pricing throughout the assess the smaller cities. “We’re working chunks of that are
very hard not to make the mistake of the
year in the major cities following the US
past and go to secondary and tertiary already in the price in
Federal Reserve raising interest rates
three times, with the expectation of cities simply to chase yield at the wrong equity and real estate
point in the cycle. But instead we’re very
further increases in 2018.
focused on what I’d call second tier cities
markets. But a degree
Investment tumbled by 32 percent in that demonstrate really strong economic of caution is warranted
New York City during 2017. Of the 14 US growth prospects and include well- given the fact that we
established institutions, whether medical,
metro areas ranked in the top 30 global
educational, or governmental, which are in the eighth or
investment destinations, RCA says only
Washington, D.C., and Houston registered stabilise those markets. We’re trying to be ninth inning, to use
very tactical and chase markets that exhibit
stronger activity.
strong fundamentals, which should make
a baseball expression,
The investment numbers also indicate them more attractive places to invest.” of the cycle.”
an ongoing investor appetite for smaller
markets, as highlighted in Emerging In any case, major and second tier Global investor,
real estate markets alike are destined Global Emerging Trends in Real Estate 2018
Trends US and Canada. More selective
than before, investors are increasingly to prosper from what has been heralded
drawn to cities such as Salt Lake City as the most sweeping US tax reform in
and Raleigh/Durham for their relative decades. President Trump’s long-awaited
affordability and skilled workforce. Tax Cuts and Jobs Act was finally
approved by Congress in December
2017, and many US property players
believe the market could feel the benefit,
possibly as early as this year.
50
3.4%
40
% 32.2%
30
46.1%
20
Space demand
10 Operating costs
6.9%
Investment economics
Investor demand
0
Yes No Unsure
Source: Emerging Trends in Real Estate 2018 Mid-Year Survey
“ Rising interest rates have According to the Emerging Trends 2018 “In 2017, there was a lot of talk about
mid-year survey conducted in the US, the late cycle and pricing bubbles,
been well telegraphed 61 percent of respondents believe the and concern that the end had to be
by central bankers, and new tax law will be good for real estate near,” adds another interviewee.
we’ve been looking at although nearly a third are unsure. “What’s shifted over the last six months
Around a quarter of respondents say is the boost provided by the tax cuts,
spreads since late 2016. the tax reform will boost investor demand, the continued strength of the US
The only difference now and a similar number say it will improve economy, the continued strength of
is that we’ve had three occupier demand. the global economy. The conclusion
is indeed we are at a late point in the
rate rises in the US, so The full impact on commercial real estate cycle, but it’s certainly being extended
we’re in that process, but remains to be seen but the three main by those factors.”
it’s not something that fiscal levers are: foreign investors will be
able to invest and repatriate profits more
spooks us. Given where easily than before; US companies that
yields are now relative to until now parked some of their profits
the cost of money, we overseas at lower corporate tax rates
can repatriate those earnings into the US;
have the ability to absorb and a reduced corporate tax rate in the
modest increases.” US. As one Emerging Trends Global
interviewee observes of the latter two
Global investor, reforms: “You would presume some of
Global Emerging Trends in Real Estate 2018 those accumulated earnings and tax
savings will lead to the expansion of
corporate America, which will spill over
into increased demand and take-up of
offices and industrial space.”
Europe – renewed optimism Led by Germany, each of Europe’s five “There is still quite a bit
in the core economies largest markets for commercial real estate
investment reported higher volumes than of capital that will be
Europe’s property industry is “cautious 2016, RCA data show, with the Netherlands allocated to Europe.
and Spain setting new records.
but positive”, drawing comfort from I don’t get the sense
the fact that the European Union (EU)
economy is growing at its fastest pace For European property professionals, that Europe is going to
in a decade, which in turn is supporting it is hard to dissociate London from the
be capital-starved any
occupier demand as well as investment. continuing uncertainty around Brexit,
which is why the UK capital languishes time soon.”
Figures from the EU statistics office at the lower end of the Emerging Trends
Europe city rankings for investment Pension fund manager,
Eurostat show that the EU grew by 2.5 Global Emerging Trends in Real Estate 2018
percent in 2017 – its strongest performance and development prospects in 2018.
since 2007 when it grew by 2.7 percent. But the report also suggests that Asian
In the final quarter, both the EU and the investors – less bothered by Brexit than
19-nation Eurozone grew by 0.6 percent their European peers – are looking Another interviewee concludes: “Global
compared with the previous quarter. to the long-term by deploying capital interest in Europe is quite high at the
in London. And according to RCA data, moment. It’s due to economic growth,
Much of the growth has been driven by London saw the highest volume of but if you think back to early 2017,
the core economies of Germany, France, international capital in 2017, particularly we were all worried about the French
Italy, and Spain, which has reassured the from Hong Kong. and Dutch elections and about populism,
industry leaders interviewed for Global the disintegration of Europe following
Emerging Trends. “The demand side is “There is more activity on the Continent,” Brexit. Now we have much, much
improving, and we’re seeing rent increases says one global investor interviewed for stronger pro-European sentiment on the
in most product types,” says one. “We don’t Global Emerging Trends. “It feels like Continent. Money still wants to come into
have retail rents going up, but we do have there’s more optimism on the back of real estate and still wants to come into
office rents rising in most markets in Europe, economic growth, but the returns would be Europe, so there’s no immediate concern
and you certainly see logistics rents rising. relatively low because prices are still high. over the next couple of years of yields
We think that’s going to continue.” That’s been the case for the last year.” de-compressing.”
Against that backdrop, Europe registered In fact, as with the US and Asia Pacific,
$314 billion of investment sales in 2017, pricing of core assets across mainland
according to RCA, and the transactions Europe is an issue for most investors,
were many and varied, from major and too high a hurdle for some. “We feel
portfolio deals to corporate mergers there are still opportunities, but you have
and acquisitions, as well as large single to move more into value-add and the
property sales – particularly in London. opportunistic space,” says one pan-
European fund manager. “If you look
at core, or prime, assets, the prices are
too high for us. We’re not willing to pay 3
percent cap rates. That’s not a product
of interest to us.”
Allocations are up and While the full impact of China’s recent “ The key thing for me
capital continues to flow tightening of capital controls remains
unclear, the consensus among industry is less about whether
The continued strength of logistics real leaders canvassed for Global Emerging we prefer China over
Trends is that overall outflows are unlikely
estate across the Americas, Asia Pacific
to decline significantly, given that sovereign
Korea or Germany over
and Europe has been one of the key
trends in recent years. According to RCA, and state investors will probably be the Netherlands or one
investment in the sector rose by as much unaffected. In addition, there is already
region over another.
as 33 percent last year to $127 billion, a substantial body of Chinese-owned
reflecting the fact that investors are capital held outside mainland China, much It’s more the fact that
targeting logistics warehousing as of it in Hong Kong, that is not subject to the there is a continued
rules. And, of course, the narrative around
companies change their supply chain
Asian capital extends well beyond China. build-up in dry powder.
management, particularly where online
retailing is involved. Either capital gradually
“If you look at what’s happening in Asia
in terms of building up social security
goes into private
CIC’s acquisition of Logicor – Europe’s
largest deal last year – and the GLP/ systems with pension schemes and markets without
Gazeley transaction also underline the insurance companies, they will want to disturbing pricing
have 5 to 10 percent allocations to real
extraordinary volume of Asian capital
estate, then you’re talking big numbers,” levels, or it goes in
still being deployed in global real estate.
Emerging Trends Asia Pacific reveals says one global player. “Real estate and a lot more rapidly, in
infrastructure is on the agenda of all
“unprecedented growth” in capital
pension schemes. And within Europe
which case investors
outflows from Asian markets in 2017 –
almost double the outflow seen in 2016 there are a lot of pension schemes that will bid marginal deals
– with $45.2 billion in outbound capital have to build up a real estate portfolio,
up, and there will be
directed at global property assets. and so we will see more cross-border
money in Europe.” underwriting errors.”
Another global investor concludes: Global investor,
Global Emerging Trends in Real Estate 2018
“Over the coming five years, I think there
will continue to be healthy interest for all
three regions. Economic growth is quite
evenly spread, so I can’t see why one
region would attract more capital than
another, and that consistency is reinforced
by the fact there is an overall average
increase in allocations to real estate.”
Not everyone is persuaded by the merits It may just be that the consolidation-for- “ We’re seeing structural
of retail scale. “Particularly in the US scale narrative will be restricted to mature
they’ve also gone too far [negative] on Western markets. But in those markets, changes across all of
poorer-quality malls,” says one global there is a clear sense among industry the sectors: retail and
player. “I always find it interesting when leaders interviewed for Global Emerging
there is an apparently clear consensus … Trends that further consolidation among
e-commerce; in offices
that poorer-quality malls are dead and retail REITs is likely, leaving them stronger with WeWork and
better-quality malls are very, very safe. and better equipped to deal with the
WeWork-type formats;
I think both of those things are wrong.” longer-term trends around technology
and e-commerce. “I don’t think it’s over by and 2017 was a huge
Another institutional investor observes: any stretch of the imagination,” says one year of activity in the
“There’s no doubt rents are under global player. “Amazon and its competitors
pressure from the internet, but I think are going to continue to invade the physical logistics space. All of
these types of trends are cyclical. space, blurring distinctions between the that’s been happening
It wouldn’t surprise me if in five, ten years’ physical and the online. That will put
time, we suddenly decide secondary technology costs up for anybody from
when we’ve seen the
shops are great, there’s too many people our side wanting to compete, which in market hunting for strong
in the larger centres and we’d rather turn will take our return on capital down.” cash-flows. You’ve got
go to the neighbourhood place.”
to stay relevant for the
Indeed, as Emerging Trends Asia Pacific occupiers if you want to
points out, neighbourhood malls are
something of a haven in Australia, partly
produce a stable cash-
because of the big distances between flow. What we will see in
warehouses and customers meaning that
the future is more focus
e-commerce deliveries will be both slow
and expensive, slowing growth. The report on operating platforms.”
also points out that elsewhere in the
region the retail industry is modestly European investment manager,
Global Emerging Trends in Real Estate 2018
upbeat because it is relatively immature,
meaning there are inefficiencies in the way
malls are built and managed and therefore
the potential for savvier operators to
differentiate their retail offer. Equally
important, shopping centres in Asia do
not generally use the department store
anchor model that has been the downfall
of so many centres in the US.
Table 1-1 Mergers and acquisitions in Europe’s listed real estate sector, 2016–17
Premium to Premium to
Date Acquiror Target Sector Transaction Transaction share price NAV
18/12/17 Vonovia BUWOG Residential Public-to-public € 5,200 18% 33%
12/12/17 Unibail-Rodamco Westfield Corp Shopping Centres Public-to-public € 24,700 18% 22%
06/12/17 Hammerson Intu Properties Shopping Centres Public-to-public £3,400 28% –21%
13/11/17 Inmobiliaria Axiare Patrimonio Multi-sector Public-to-public € 1,100 13% 7%
Colonial
21/06/17 Gecina Eurosic Office Public-to-public € 3,300 25% 16%
05/06/17 Blackstone Sponda Multi-sector Privatisation € 1,763 21% 2%
05/09/16 Vonovia Conwert Residential Public-to-public € 2,878 9% 7%
04/03/16 Eurosic Foncière de Paris Office Public-to-public € 2,505 23% 8%
Average 19% 9%
Median 17% 8%
Average (ex-German Resi) 21% 6%
Median (ex-German Resi) 19% 8%
Table 1-2 Mergers and acquisitions in the US listed real estate sector, 2016–17
Premium to Premium to
Date Acquiror Target Sector Transaction Transaction share price NAV
10/08/17 Invitation Homes Starwood Single-Family Public-to-public $7,835 1% –13%
Waypoint Homes Rental
09/06/17 Digital Realty Trust Dupont Fabros Tech Public-to-public $7,727 16% 50%
Tech
07/05/17 Sabra Health Care Care Capital Health Care Public-to-public $4,050 14% 20%
REIT Properties
24/04/17 RLJ Lodging Trust Felcor Lodging Hotel Public-to-public $2,452 17% N/A
Trust
14/11/16 Regency Centers Equity One Strip Center Public-to-public $5,938 13% 0%
15/08/16 Mid-America Post Properties Apartment Public-to-public $5,005 16% –1%
Apartment
Communities
29/04/16 Cousins Properties Parkway Office Public-to-public $3,604 13% N/A
Properties Inc.
19/01/16 Brookfield Asset Rouse Properties Mall Privatisation $2,689 39% 10%
Management
Average 18% 8%
Median 16% 1%
Table 1-3 Top 10 global and continental cross-border trade routes, 2017
Sources: Emerging Trends in Real Estate Europe 2018, Emerging Trends in Real Estate Asia Pacific 2018,
Emerging Trends in Real Estate United States and Canada 2018
Table 1-4 11–20 global and continental cross-border trade routes, 2017
The real estate industry is gradually recognising the need to “Where value resides
adapt to the disruptive change that technology is bringing about in the real estate sector,
in the sector, and starting to come up with the strategies it thinks
are the best way to address and profit from this change.
it will shift to new
or hybrid models of
existing and new players
Some still have their head in the sand. Embracing change matters
But while many industry leaders do not now more than ever who manage to harness
want to face up to the fact that their data as a competitive
businesses need to alter radically, some
are setting up R&D facilities in Silicon Valley
The need to embrace disruptive operational advantage
technology and business practices is
to build and invest in the technology that more acute than ever, because real and create entirely new
could change the sector. estate is at a liminal moment. revenue opportunities
The sector is starting to think about some Many of those interviewed believe that
that leverage the scale
of the challenges it will face from technology, now is a crucial point in the sector’s of their portfolios.”
such as driverless cars and blockchain. evolution, and those companies unwilling
It is starting to adapt properly to the or unable to embrace change risk being Real estate technology executive,
biggest technological change of the past permanently left behind. Global Emerging Trends in Real Estate 2018
decade – the smart phone. The answers
are not all there, but the right questions There are two main reasons cited for this.
are starting to be asked. Huge amounts of capital are flowing into With that in mind, to raise money and
the sector, and it will flow to the companies make money in an increasingly crowded
The human resources challenge is huge that can use technology to give themselves
− real estate is still not hiring enough field will require greater sophistication.
even the smallest edge. And those that have this greater
of the right people, or putting the right
people in positions of influence, according sophistication will be rewarded.
And with real estate late in the cycle,
to many of the senior professionals investors and owners will need to
canvassed for Global Emerging Trends. “Being at the forefront of change and
utilise any means necessary to improve capturing some of this new inflow will
There is not enough leadership from the performance of assets – and maintain
front on these matters, with real estate give companies an outsize advantage,”
performance during a downturn. one interviewee says. “If you look at
chief executives in particular perceived
to be reluctant to hire the right people Blackstone and Brookfield, they are
On the first point, one investor cites the maybe 5 to 10 percent better than their
and undertake the change in business sharply increased competition they are
models required to keep up with the peers and they are hoovering up capital.
currently facing, as record amounts of Technology creates outsized winners
pace of change. capital move into the real estate sector. and that is what will happen in real
estate, too.”
“Increased liquidity, combined with
improvements in data that bring greater This will be especially important as real
transparency to the sector make it harder estate, inevitably, approaches the point
to find alpha,” they say. “In the 1980s there when values start going down rather
was very little competition, and institutional than up.
investors were not sophisticated, so it
was pretty easy to make money from
them. Not any more.”
“In terms of hiring, real estate companies The same interviewee argues that there Dealing with proptech –
are not shaking up the org chart. Too often, are very few tangible examples that can buy, build, or bury your head
they are doing things like making the be held up where a real estate company,
head of IT the chief data officer or either a principal or a services firm, The interviewees for this report covered
chief technology officer, and they has radically altered their business to the entire spectrum of views when it
are fundamentally different roles.” take account of disruptive technology comes to proptech – technology utilised
or business practices, and come out by real estate companies to enhance the
But beyond this, there is the feeling that the other side able to prove that change running of their business. For some it
a generational shift would be required has been beneficial. is just a buzzword, and they have not
to instigate more meaningful change – changed how they run their business or
a potentially slow process. “It is more Rather, there are examples where applied much in the way of new technology.
important to be hiring lots of people companies have tried and failed and
at the bottom of the organisation who serve as a warning about the pitfalls At the other end of the spectrum, four
understand technology and its impact of changing too quickly or getting investors or developers interviewed have
rather than one person at the top,” change wrong. set up their own divisions to invest in and
one interviewee says. develop proptech. One investor has even
set up their own dedicated proptech
There is also a feeling that senior leaders investment and R&D facility in Silicon
are not doing enough to accelerate “Implementing Valley to get access to the best talent
the process of change in companies. cultural change takes and ideas that the technology sector
But before they are judged, there are
compelling human reasons why leaders
investment, and many can offer.
might prefer to maintain the status quo. CEOs don’t want to In the main, these are some of the largest
Disruption vs. stability: how While in general the consensus remains “ As an industry, we are
various sectors are affected that fortress malls in the best locations
would perform well, and that Asian not as vulnerable to
In terms of specific sectors of real estate investors are furthest along the path of disruption as other
adapting malls to new technology and
that are facing disruption, there is little
ways of living, some anticipate that even
sectors of the economy.
surprise that interviewees most commonly
cite logistics and retail. The two sectors here the need to convert space from On the contrary, it is
are two sides of the same coin, impacted retail use would eventually be felt.
unlikely that apartments
positively and negatively by e-commerce.
Most interviewees believe more mature “The extension to Westfield London will will be replaced by digital
markets like the US, China, and the UK have a John Lewis department store. products. But we can
Will that still be a department store in 20
will see growth moderate but continue
years? I don’t think so,” one investor use digital products
nonetheless, and the rest of the world
is catching up. says. “People are underestimating how ourselves and offer
capex will impact the valuation of even
the best centres, because they can hide
them in addition to the
One development in the retail sector is
the fact that shopping mall investors it below the line.” apartment to customers.
and developers are past the phase of And by building houses
There were two sectors where the effect
wondering what to do with empty space
of disruption was increasingly felt in 2017, using modules that are
in their properties. They are getting on
and converting it to other uses, such as and which interviewees felt would continue produced in the factory
to see huge changes over the coming
co-working space, libraries, health care
years, and that is offices and hotels.
and only installed on site,
centres, and even mini-golf courses, as is
the case with a huge empty department
we can quickly realise
store on London’s Oxford Street2. In the office sector, WeWork – and
cost-effective new
co-working and flexible offices more
generally – dominate almost every construction in existing
conversation. One tech investor paints neighbourhoods.”
a picture of the scale of the opportunity.
According to CBRE estimates, revenue European investor,
from global office rentals is a $600 billion Global Emerging Trends in Real Estate 2018
a year business. If flexible offices grow
from 1 percent to 20 percent or more
of that market, as the same broker
estimates, that is $120 billion of revenue
up for grabs.
2) https://europe.uli.org/trading-dining-leisure-amenities-new-shopping-centre/
Disruption: from blockchain Figure 2-1 Area most likely to be affected by technology
to driverless cars
In terms of specific technologies that will Design and construction
have a significant impact on the operation
and value of real estate, two areas are
cited much more consistently than others: Big data
Tenant requirements
It would seem as if the real estate sector
now has an intense focus on how the
implementation of driverless cars and Property management
Heavy Goods Vehicles (HGVs) will impact
its world: virtually every interviewee,
when asked about big technological Leasing
disruptions in the sector, mentions
autonomous vehicles.
Sales
Another example is Google’s smart The counter argument is that real estate The likelihood is that the two worlds will
city project in Toronto, or WeWork’s is too large and fragmented an industry increasingly collide and complement
encroachment in the office sector. to see true consolidation. Blackstone and each other, and that being successful in
“Given that the ultimate end goal of Brookfield own more than $200 billion of real estate over the coming decades will
buildings is to attract talent and retain real estate, but in an industry of more than be about being best positioned to profit
loyalty, tech companies will be able to $2 trillion, that is still small. “The value of from these collision points. As a sign
do this better than existing real estate real estate goes into trillions, think about of things to come, two global giants of
companies,” an interviewee argues. the net worth of a city like London. e-commerce, Amazon and Alibaba, have
So, this will not change hands quickly.” both made big moves into the world of
WeWork is clearly following the tech physical real estate. The former paid
company playbook of trying to become $24 billion for the US grocery chain Whole
so big that it dominates the office sector Foods, and the latter has spent more than
and has greater leverage than any single “ Given that the ultimate $10 billion on shopping centres and other
traditional office landlord. It remains to end goal of buildings retail assets in the past couple of years.
be seen how this plays out. But with a
valuation of $20 billion from its last
is to attract talent and
funding round, it is already theoretically retain loyalty, tech
valued at more than the world’s largest companies will be able
office REIT, Boston Properties, which has
a market capitalisation of $19 billion.
to do this better than
existing real estate
companies.”
Real estate tech executive,
Global Emerging Trends in Real Estate 2018
“ The traditional real “The traditional real estate sector will The answer, in short, will be both. There
not sit just there and wait to have its is plenty of opportunity for new entrants
estate sector will not sit lunch eaten by new digital companies, to disrupt the sector and steal value
just there and wait to they will respond.” and market share. But there is enough
willingness to adapt from incumbent
have its lunch eaten by An example is in the world of multifamily businesses to ensure that they are also
new digital companies, housing, where some developers are able to profit from change.
they will respond.” building schemes that contain units
specifically designed for use on Airbnb – “The ideal solution would be older
or in some cases even entire schemes. businesses recognising the change
Global investor,
Global Emerging Trends in Real Estate 2018 “It provides Airbnb with supply, which and bringing about new profit pools
is the company’s biggest constraint,” in business they didn’t have previously,”
one interviewee points out, “and in the one interviewee says. “Digitising the past
multifamily sector, it is a good way of will not help them evolve and move forward.
Indeed, many interviewees point to finding demand in a market that has been However, digitising the past may help them
Alibaba as an interesting example of how oversupplied in some areas, particularly realise their market position and how subtle
physical and online retail can be profitably at the luxury end.” In a similar way, in the changes to operations can develop new
merged. As well as its investment in hospitality sector big companies like areas to monetise in their sector and
department stores and shopping centres, Accor have created multiple brands and safeguard their future.”
which complement its delivery network, styles of property to appeal to different
the company has equipped more than kinds of consumer and try to see off the
600,000 small stores across China with threat of Airbnb.
computer software that allows them
to be linked to a wider network, helping And companies like Vonovia have pivoted
customers find goods in networked stores from being traditional institutional owners
nearby, and giving store owners information of real estate to being much more
on what goods they could profitably sell. consumer-facing. “It is now a consumer
The challenge for real estate will be to do company that touches the lives of 700,000
the same thing but from the position of Germans where its product just happens
the owner of the physical assets. to be real estate,” one interviewee says.
PwC’s real estate practice assists real estate investment advisers, The Urban Land Institute is a global, member-driven organization
real estate investment trusts, public and private real estate investors, comprising more than 40,000 real estate and urban development
corporations and real estate management funds in developing real professionals dedicated to advancing the Institute’s mission of
estate strategies; evaluating acquisitions and dispositions; and providing leadership in the responsible use of land and in creating
appraising and valuing real estate. Its global network of dedicated real and sustaining thriving communities worldwide.
estate professionals enables it to assemble for its clients the most
ULI’s interdisciplinary membership represents all aspects of the industry,
qualified and appropriate team of specialists in the areas of capital
including developers, property owners, investors, architects, urban
markets, systems analysis and implementation, research, accounting,
planners, public officials, real estate brokers, appraisers, attorneys,
tax and legal.
engineers, financiers, and academics. Established in 1936, the Institute
has a presence in the Americas, Europe, and Asia Pacific regions,
with members in 76 countries.
Global Real Estate Leadership Team
The extraordinary impact that ULI makes on land use decision making
Craig Hughes is based on its members sharing expertise on a variety of factors
Global Real Estate Leader affecting the built environment, including urbanization, demographic and
PwC (UK) population changes, new economic drivers, technology advancements,
and environmental concerns.
Bart Kruijssen
European, Middle East & Africa Real Estate Leader Peer-to-peer learning is achieved through the knowledge shared by
PwC (Netherlands) members at thousands of convenings each year that reinforce ULI’s
position as a global authority on land use and real estate. In 2017 alone,
Byron Carlock
more than 1,900 events were held in about 290 cities around the world.
US Real Estate Practice Leader
PwC (US) Drawing on the work of its members, the Institute recognizes and
shares best practices in urban design and development for the benefit
KK So
of communities around the globe.
Asia Pacific Real Estate Tax Leader
PwC (China) More information is available at uli.org. Follow ULI on Twitter, Facebook,
LinkedIn, and Instagram.
Gareth Lewis
Emerging Trends in Real Estate Global Project Director
PwC (UK)
Ralph Boyd Urban Land Institute
www.pwc.com Chief Executive Officer 2001 L Street, NW
Urban Land Institute (Americas) Suite 200
Washington, DC 20036-4948
Lisette van Doorn U.S.A.
Chief Executive Officer 202-624-7000
Urban Land Institute (Europe) uli.org
John Fitzgerald
Chief Executive Officer
Urban Land Institute (Asia Pacific)
Anita Kramer
Senior Vice President
ULI Center for Capital Markets
and Real Estate
Elizabeth Rapoport
Content Director
Urban Land Institute (Europe)
Interview participants
AEW Innovation in Real Estate
David Schaefer Antony Slumbers
Allianz Real Estate Internos Global
François Trausch Jos Short
APG KKR
Patrick Kanters Ralph Rosenberg
AXA IM – Real Assets Patrizia Immobilien
Stephen D McCarthy Anne Kavanagh
Beos PGGM Investment
Stephan Bone-Winkel Guido Verhoef
Blackstone PropTech Consult
James Seppala James Dearsley and Eddie Holmes
Brookfield PSP Investments
Niel Thassim Neil Cunningham
Canada Pension Plan Investment Board QuadReal Property
Andrea Orlandi Dennis Lopez
Fifth Wall Ventures Signa
Roelof Opperman Jürgen Fenk
Gecina Vonovia
Méka Brunel Rolf Buch
Global Logistics Properties VTS
Seek Ngee Huat Brandon Weber
Hines
Lars Huber
We have drawn together those regional insights with additional interviews to focus on the most relevant investment
and development trends across the globe, the outlook for real estate finance and capital markets, and the long-term
influence of megatrends over the industry.
www.pwc.com/real-estate-trends-global
www.uli.org
The Emerging Trends in Real Estate 2018 series of reports are available at: www.pwc.com
Emerging Trends in Real Estate® is a registered trademark of PricewaterhouseCoopers LLP (US firm) and is registered in the United States and European Union.
© March 2018 by the Urban Land Institute and PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which
is a separate legal entity. Please see www.pwc.com/structure for further details. No part of this publication may be reproduced in any form or by any means, electronic
or mechanical, including photocopying and recording, or by any information storage and retrieval system, without written permission of the publisher.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the
information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy
or completeness of the information contained in this publication, and to the extent permitted by law, the Urban Land Institute and PwC do not accept or assume any
liability, responsibility, or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication
or for any decision based on it.
Recommended bibliographic listing: PwC and the Urban Land Institute. Emerging Trends in Real Estate®: The Global Outlook for 2018.
London: PwC and the Urban Land Institute, 2018.
ISBN: 978-0-87420-265-6