RESIDENTIAL property sales have been shrinking consistently throughout 2023, but latest figures show this trend is relenting.
The future of property investment analysed – and how Spain fits in
06/03/2022
SPAIN'S two largest metropolitan areas have been listed among the top 10 European cities to invest in property for yet another year – and both have risen in the rankings since the 2021 report.
Consultancy firm PwC, along with the Urban Land Institute (ULI), have published their most recent investment research findings and describe a 'post-pandemic leap in confidence'.
Commercial confidence in the property market is at its 'highest level since 2014', the report states, whilst also predicting 'profound changes' to the estate agency industry as a result of 'changing consumer demands, digitalisation and an ever-stronger ESG [Environmental, Social and Governance] agenda'.
Residential property ranks jointly with logistics as the top investments post-Covid, and 'green' energy infrastructure, 'life sciences and data centres' are, additionally, tipped to be increasingly sought-after.
“[A] need for organisational transformation embracing technology, skills and ESG [sustainability performance] is a key priority, according to 68% of estate agency leaders,” the article reads.
'Positivity, relief and short-term optimism' in the European property industry
Now in its 19th year, the Emerging Trends in Real Estate Europe report for 2022 considers the professional views of 844 property industry specialists, who largely found 'positive outlooks' had doubled in the past 12 months, 'reflecting a broad sense of relief and short-term optimism that the industry has remained resilient during the pandemic'.
But for the longer term, a widespread sense of uncertainty remains as industry professionals continue to 'come to terms with the radical changes to the business...brought about or accelerated by Covid-19'.
'Strong investor demand' is reported for 2022, and the analysis quotes Urban Land Institute Europe's chief executive, Lisette van Doorn, as saying that the continent-wide property industry is 'coming to learn' that the end of the major public health crisis caused by Covid 'is not a straight line'.
“There is pent-up demand from which to benefit, but [the industry] also needs to get to grips with what 'restarting the economy' really means,” says the CEO.
“The current uncertainties are reflected into quite strong sentiment swings while, at the same time, the industry is struggling to interpret the potential impact issues like supply-chain disruptions, surging energy costs and labour shortages will have...and how long these issues might last.”
Challenges the industry seeks to adapt to
PwC and the Urban Land Institute break down shorter-term uncertainties for business in general, and specifically for the property industry.
Online security is a concern for two-thirds of them, inflation for six in 10 surveyed and interest rates for 55%.
But the most pressing challenges perceived for the coming year are availability of suitable land and assets, for two-thirds; sustainability and decarbonisation or 'net zero' requirements, for 61%, and the biggest of all, availability of resources and the cost of construction, for 88%.
The latter is the most likely – although all have a potential – to affect keys-in-hand timescales and the price of new builds.
This is closely linked to Lisette von Doorn's 'supply-chain disruptions', as building materials have become harder to source and more expensive, affecting major civil engineering works as well as residential property construction.
And forced changes in the way businesses operate to respond to the fast-expanding digital and environmental agenda will be thrust into the mix with 'massive structural change' that has come galloping relentlessly onto the scene with the pandemic – such as a greater focus on the 'remote' world rather than on face-to-face contact, for example.
Short-term positivity and relief coupled with longer-term uncertainty translates to around six in 10 respondents to the PwC-ULI survey stating they expect to become net buyers of property assets in 2022, a slight increase on the 5.5 in 10 from 2021.
Overall, property is considered to be 'inherently more attractive' as an investment than many other types of asset, the report finds.
Two entries for the only southern European country in the top 10
As for the best European cities for investing in property, the Belgian capital of Brussels has slipped into the top 10 this year, rising from 12 in 2021.
Barcelona, Spain's second-largest city, has made an even greater leap, from 13th last year to 9th this year.
The German city of Hamburg and the Dutch capital of Amsterdam, at numbers eight and seven respectively, have both fallen two slots from last year's fifth and sixth.
Sixth place is now occupied by Madrid, after the Spanish capital climbed two positions, from eighth, in 2021.
Back in Germany, Munich has also climbed two positions, sitting fifth in 2022 compared with seventh in 2021.
In total, Germany has four entries in the top 10 – Frankfurt, the seat of the European Central Bank (BCE), remains unchanged in its fourth place, whilst the capital, Berlin, has dropped down a slot from first to second.
Paris has not moved since 2021 – the French capital is still third.
This year, the UK capital of London tops the list, leapfrogging Berlin, having been second in 2021.
PwC and the ULI say Berlin 'shares the robust economy and transparency' of the three other cities in Germany on the list 'whilst having its own distinctive appeal, particularly for international investors'.
The report says Paris' high position is due to its 'gateway status', which London is also described as enjoying and which has contributed to its having risen in the ranks.
London 'benefits from the depth of its market', as well as 'confidence in its ability to reinvent itself as a base for technology and life sciences', the analysis reveals, along with a 'widely-perceived yield gap of around 1%' between office buildings in the UK capital and the equivalent type in continental Europe.
This said, the initial outlay for London property is much higher than many of the other cities in the top 10, particularly those in Spain.
In fact, Spain is the only country in southern Europe that figures in the ranking.
Types of property attracting major investors in 2022
Some of the possible longer-term changes that could affect investments include whether or not office buildings might become redundant – at least in a significant minority of cases – as working remotely, which became the norm during the worst of the pandemic, has been catching on due to the huge benefits it can potentially offer companies and employees alike, as well as its impact on climate change as air pollution is drastically cut by fewer commuters using their cars or other forms of transport.
Of those surveyed by PwC and the ULI, all bar 15% expected home-working to take over and account for more and more of an employee's hours in the next few years.
On the flip side, though, 82% believed a company having a physical head office, at least, would continue, due to this being a symbol of the corporation, its brand and culture, a permanent form of advertising, and a 'calling card' for customers and potential staff, leading to the right talent being drawn to it.
Three-quarters of respondents believed this would lead to head office premises increasing in value faster than branch office buildings.
Assets ranked as the most popular in all of the top 10 European cities on the list were renewable energy infrastructure, life sciences (such as medical research laboratories), logistics facilities – such as packaging and storage warehouses and transport hubs, especially in light of the sharp rise in online purchases and home deliveries during Europe's various lockdowns – data centres, healthcare provision facilities, nursing homes or sheltered accommodation, including warden-assisted individual homes, industrial buildings and warehouses in general, affordable housing, self-storage facilities, and residential homes for private long-term rental.
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SPAIN'S two largest metropolitan areas have been listed among the top 10 European cities to invest in property for yet another year – and both have risen in the rankings since the 2021 report.
Consultancy firm PwC, along with the Urban Land Institute (ULI), have published their most recent investment research findings and describe a 'post-pandemic leap in confidence'.
Commercial confidence in the property market is at its 'highest level since 2014', the report states, whilst also predicting 'profound changes' to the estate agency industry as a result of 'changing consumer demands, digitalisation and an ever-stronger ESG [Environmental, Social and Governance] agenda'.
Residential property ranks jointly with logistics as the top investments post-Covid, and 'green' energy infrastructure, 'life sciences and data centres' are, additionally, tipped to be increasingly sought-after.
“[A] need for organisational transformation embracing technology, skills and ESG [sustainability performance] is a key priority, according to 68% of estate agency leaders,” the article reads.
'Positivity, relief and short-term optimism' in the European property industry
Now in its 19th year, the Emerging Trends in Real Estate Europe report for 2022 considers the professional views of 844 property industry specialists, who largely found 'positive outlooks' had doubled in the past 12 months, 'reflecting a broad sense of relief and short-term optimism that the industry has remained resilient during the pandemic'.
But for the longer term, a widespread sense of uncertainty remains as industry professionals continue to 'come to terms with the radical changes to the business...brought about or accelerated by Covid-19'.
'Strong investor demand' is reported for 2022, and the analysis quotes Urban Land Institute Europe's chief executive, Lisette van Doorn, as saying that the continent-wide property industry is 'coming to learn' that the end of the major public health crisis caused by Covid 'is not a straight line'.
“There is pent-up demand from which to benefit, but [the industry] also needs to get to grips with what 'restarting the economy' really means,” says the CEO.
“The current uncertainties are reflected into quite strong sentiment swings while, at the same time, the industry is struggling to interpret the potential impact issues like supply-chain disruptions, surging energy costs and labour shortages will have...and how long these issues might last.”
Challenges the industry seeks to adapt to
PwC and the Urban Land Institute break down shorter-term uncertainties for business in general, and specifically for the property industry.
Online security is a concern for two-thirds of them, inflation for six in 10 surveyed and interest rates for 55%.
But the most pressing challenges perceived for the coming year are availability of suitable land and assets, for two-thirds; sustainability and decarbonisation or 'net zero' requirements, for 61%, and the biggest of all, availability of resources and the cost of construction, for 88%.
The latter is the most likely – although all have a potential – to affect keys-in-hand timescales and the price of new builds.
This is closely linked to Lisette von Doorn's 'supply-chain disruptions', as building materials have become harder to source and more expensive, affecting major civil engineering works as well as residential property construction.
And forced changes in the way businesses operate to respond to the fast-expanding digital and environmental agenda will be thrust into the mix with 'massive structural change' that has come galloping relentlessly onto the scene with the pandemic – such as a greater focus on the 'remote' world rather than on face-to-face contact, for example.
Short-term positivity and relief coupled with longer-term uncertainty translates to around six in 10 respondents to the PwC-ULI survey stating they expect to become net buyers of property assets in 2022, a slight increase on the 5.5 in 10 from 2021.
Overall, property is considered to be 'inherently more attractive' as an investment than many other types of asset, the report finds.
Two entries for the only southern European country in the top 10
As for the best European cities for investing in property, the Belgian capital of Brussels has slipped into the top 10 this year, rising from 12 in 2021.
Barcelona, Spain's second-largest city, has made an even greater leap, from 13th last year to 9th this year.
The German city of Hamburg and the Dutch capital of Amsterdam, at numbers eight and seven respectively, have both fallen two slots from last year's fifth and sixth.
Sixth place is now occupied by Madrid, after the Spanish capital climbed two positions, from eighth, in 2021.
Back in Germany, Munich has also climbed two positions, sitting fifth in 2022 compared with seventh in 2021.
In total, Germany has four entries in the top 10 – Frankfurt, the seat of the European Central Bank (BCE), remains unchanged in its fourth place, whilst the capital, Berlin, has dropped down a slot from first to second.
Paris has not moved since 2021 – the French capital is still third.
This year, the UK capital of London tops the list, leapfrogging Berlin, having been second in 2021.
PwC and the ULI say Berlin 'shares the robust economy and transparency' of the three other cities in Germany on the list 'whilst having its own distinctive appeal, particularly for international investors'.
The report says Paris' high position is due to its 'gateway status', which London is also described as enjoying and which has contributed to its having risen in the ranks.
London 'benefits from the depth of its market', as well as 'confidence in its ability to reinvent itself as a base for technology and life sciences', the analysis reveals, along with a 'widely-perceived yield gap of around 1%' between office buildings in the UK capital and the equivalent type in continental Europe.
This said, the initial outlay for London property is much higher than many of the other cities in the top 10, particularly those in Spain.
In fact, Spain is the only country in southern Europe that figures in the ranking.
Types of property attracting major investors in 2022
Some of the possible longer-term changes that could affect investments include whether or not office buildings might become redundant – at least in a significant minority of cases – as working remotely, which became the norm during the worst of the pandemic, has been catching on due to the huge benefits it can potentially offer companies and employees alike, as well as its impact on climate change as air pollution is drastically cut by fewer commuters using their cars or other forms of transport.
Of those surveyed by PwC and the ULI, all bar 15% expected home-working to take over and account for more and more of an employee's hours in the next few years.
On the flip side, though, 82% believed a company having a physical head office, at least, would continue, due to this being a symbol of the corporation, its brand and culture, a permanent form of advertising, and a 'calling card' for customers and potential staff, leading to the right talent being drawn to it.
Three-quarters of respondents believed this would lead to head office premises increasing in value faster than branch office buildings.
Assets ranked as the most popular in all of the top 10 European cities on the list were renewable energy infrastructure, life sciences (such as medical research laboratories), logistics facilities – such as packaging and storage warehouses and transport hubs, especially in light of the sharp rise in online purchases and home deliveries during Europe's various lockdowns – data centres, healthcare provision facilities, nursing homes or sheltered accommodation, including warden-assisted individual homes, industrial buildings and warehouses in general, affordable housing, self-storage facilities, and residential homes for private long-term rental.
Related Topics
You may also be interested in ...
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