The global real estate market will continue to grow hand-in-hand with investment in the sector over the next 16 years with rapid urbanisation and demographic changes in the emerging markets delivering “spectacular returns”.
The forecast comes in a report, by asset management specialists Real Estate 2020, which claims the global stock of investable real estate will rise by more than 55 per cent to around £27.3 trillion within the next six years. It will then expand again by a similar proportion to 2030.
Private capital will play a critical role in funding the world growth in commercial and residential real estate and its supporting infrastructure. Intense competition for prime property will force fund managers and investors to seek out new opportunities for profits, the company warns. Yet the growing and changing real estate world will present them with a far wider range of risks, which they must be equipped to manage.
Commenting on the survey Kees Hage, of PricewaterhouseCoopers, agreed the property market was now at the centre of rapid economic and social change.
“Already thousands of people are migrating from country to city across Asia, the Middle East, Latin America and Africa, attracted by the wealth of these new economies. By 2020, this migration will be firmly established. Cities in these regions will swell and some entirely new ones will spring up.” It is incumbent for an industry with long development cycles to plan for these changes, he added.
Real Estate 2020 stressed the changing landscape will have major implications for real estate investment and development, increasing the size of the asset pool as well as the nature of investment opportunities.
Future success factors, it says, will include possessing a global network with local knowledge and good government relations, specialist expertise and innovation, a tight focus on cost management and scale, and attracting and investing in the right staff.
The response to the coming changes in the real estate industry will require considerable thought and forward planning in order to form and implement a winning strategy, the report stresses, while adding: “The successful real estate managers of 2020 will have already started to shape their responses to some or all of these changes.”
Ilse French is PwC’s asset management and real estate leader for Africa. “Global mega-trends will change the real estate landscape considerably over the next six years and beyond,” she says. “While these trends may already be evident, there’s a natural tendency to underestimate how much the real estate world will change … By 2020, real estate managers will have a broader range of opportunities, with greater risks and new value drivers.”
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