Real Estate 2020: Building the Future, by PricewaterhouseCoopers
A worldwide boom in development should not take the real estate investment industry by surprise, notes a new report by PricewaterhouseCoopers. "By 2020, real estate managers will have a broader range of opportunities, with greater risks and new value drivers. As real estate is a business with long development cycles … now is the time to plan for these changes."
Global construction output is expected to almost double to $15 trillion by 2025, from $8.7 trillion in 2012, while the global stock of investable real estate will rise even more quickly, from $29 trillion in 2012 to about $45.3 trillion in 2020. Much of this development will take place in new cities now rising in Asia and sub-Saharan Africa. "The greatest social migration of all time — chiefly in emerging economies — will drive the biggest ever construction surge," the report notes.
"Real Estate 2020: Building the Future" makes the following six predictions for 2020 and beyond:
- The global investable real estate universe will expand substantially, leading to a huge growth in opportunity, especially in emerging economies.
- Fast-growing cities will present a wider range of risk and return opportunities.
- Technology innovation and sustainability will be key drivers for value, and will make some existing types of real estate obsolete.
- Collaborating with governments will become more important, to mitigate risk for development schemes that might be uneconomic without government support.
- Competition for prime assets will intensify further, as new wealth from emerging economies intensifies competition for prime assets.
- A broader range of risks — and new risks — will emerge, including climate change risk, accelerating behavioral change, and political risk.
The report goes on to describe real estate’s changing global landscape, discuss implications for real estate strategies, and describe factors that will lead to future success.
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