PWC Report Expects Investable Real Estate to Grow

PricewaterhouseCoopers (PWC) released its latest report that anticipates global investable real estate to grow by more than 55% to around $45.3 trillion by 2020 (from a 2012 total of $29 trillion). The report, Real Estate 2020, suggests that these expansions will be greatest in emerging economies, where economic development should lead to better tenant quality and, in some countries, clearer property rights and will play out across housing, commercial real estate and infrastructure.

"Demographic shifts will affect demand for real estate fundamentally in 2020 with the aging Baby Boomers creating an increase in demand for specialist types of real estate like senior and intergenerational housing, while there will be a rise in micro-units for the younger population," said Mitch Roschelle, partner, U.S. real estate advisory practice leader, PWC. "As the real estate industry and environment evolves, there are certain risks that market participants should be aware of so they can navigate those challenges thoughtfully, while also being able to jump on the increasing amount of opportunities in the space. This is how we help our clients at PWC – and we’re working with them now so they will be fully prepared in 2020 and beyond."

An excerpt of other changes in real estate the report expects by 2020:

• A huge expansion in cities, with mixed results. By 2020, the 21st century’s great migration to the cities will be well underway. Cities are expected to swell across the fast-growing countries of Asia, Africa, the Middle East and Latin America. Even the developed Western countries will be urbanizing, albeit at a slower pace. By 2020, cities will be competing fiercely with each other.
• Growth in emerging markets is anticipated to ratchet up competition for real estate assets and competition between real estate organizations.
• Sustainability will transform design of buildings and developments, presenting opportunities and risks for real estate asset managers.
• Technology will disrupt real estate economics: growth in online shopping will continue to reduce the need for retail space, but shorter delivery times increase the need for warehouse space close to customers. As workers increasingly work from home or satellite offices, the need for office space will decrease. For developers, technology advances will make eco-efficient building more practical. Real estate capital will take financial center stage. Private capital will play a critical role in funding the growing and changing need for real estate and its supporting infrastructure. Real estate managers will need to leverage the full range of financing possibilities to take on new types of risk, often with long-term investment horizons.

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