Granted, there was an ebb and flow of capital around the regions, but the fact that overall global deal volume increased at all is testimony to the strength of demand for the income real estate offers, given the turbulent geo-political and economic conditions for investment in 2018. If anything, however, 2019 is likely to present a greater test of the industry’s collective nerve.

The industry leaders canvassed for Global Emerging Trends all take comfort from the fact that there is lower leverage in the system and lower levels of supply in all regions than in previous cycles. But in light of the worsening economic backdrop to investment, pricing of core real estate – a long-running concern in all three of our regional reports – becomes more of an issue than ever.

One global player believes the market is at a “transition point” as a result of current pricing and changes to monetary policy. A correction is coming, sooner or later. And as all three regional reports show, investors and fund managers are revising their strategies according to their own appetite for risk, albeit stopping short of moving into secondary locations as they did in the previous cycle.

Operating in a new world
The regional Emerging Trends in Real Estate reports, published towards the end of 2018, all show that obsolescence is a growing concern for asset owners across the globe, against the backdrop of rapid changes in technology, demography and social norms.

Technology, particularly mobile technology, has put much more power in the hands of the consumer, which is driving change across all sectors. And as new generations become workers and consumers, different social values and choices are influencing where and how people work and shop – and underpinning the rise of the shared economy.

Assets will need to be adapted to meet the needs of the people using them more effectively, or converted to entirely new uses. Real estate owners will need to become operational businesses, and learn very different skills than they required even five years ago. At the heart of this will be understanding what the person using a building wants and delivering it seamlessly.

The challenges do vary, according to sector, but all are affected by the possibility of accelerated obsolescence. Retail and hospitality have been in the eye of the storm for some time; offices are closer to the beginning of the revolution. The residential and industrial sectors seem to be more insulated from change because of the positive balance between supply and demand. Industrial is perhaps storing up problems for the future around the design of buildings in sectors where the technology of the occupier is advancing rapidly.

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