Rapid urbanization and demographic changes, especially within emerging markets, is anticipated to lead to substantial growth in the real estate investment industry over the next six years, according to Real Estate 2020: Building the future, a new report from PwC.
At the same time as the industry’s opportunities grow, so too will assets invested into the sector.
The report anticipates that the global stock of investable real estate will rise by more than 55 percent to around $45.3 trillion by 2020, from a 2012 total of $29.0 trillion, and is expected to expand again by a similar proportion by 2030.
The expansion 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.
The report also finds that private capital is expected to play a critical role in funding the growing and changing need for real estate and its supporting infrastructure.
Intense competition for prime real estate will likely cause real estate managers and investors to seek out new opportunities for yield.
Yet the growing and changing real estate world will present them with a far wider range of risks, which they should be equipped to manage.
“The real estate industry is currently undergoing fundamental changes today that we expect will significantly reshape the landscape in 2020,” said Byron Carlock, U.S. real estate practice leader, PwC.
“And with $40-50 trillion of infrastructure investment forecasted, there will be significant new real estate opportunities, especially for urban density housing and transit-oriented development – and urban high street retail. Real estate managers and investors need the vision to anticipate emerging trends in the medium-term and prepare for them now in order to be successful in 2020.”
Other changes in real estate by 2020 will include:
• 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.
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