Risky Business: Optimism among investors is growing but the road to recovery is paved with challenges according to WTW’s Global Real Estate survey

Risky Business: Optimism among investors is growing but the road to recovery is paved with challenges according to WTW’s Global Real Estate survey 150 150 Haggie Partners

Investor confidence in the once steady real estate sector has been shaken. A shift in the demand for office and retail space, coupled with inflation and a rise in interest rates, has left its mark. However, firms have entered 2024 with a feeling of optimism, more so than market headwinds would suggest, with a focus on the property technology (proptech) revolution and innovations such as smart buildings. This is according to the latest Global Real Estate Risk Outlook Report released by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.

The report canvassed views from 350 companies from around the world, from property investors to asset managers and pension funds. The analysis not only uncovers the evolving significance of risk management practices but also delves into the contemporary challenges and opportunities inherent in the real estate business landscape.

Key findings include:

  • Hope on the horizon. 55% of firms believe their assets will increase in value overall in the next two years with 68% positing that rental rates will improve despite one of the deepest market downturns in recent history.
  • Confidence in technology is strong. Proptech and AI could be transformational with 62% reporting that property technology was among their greatest opportunities over the next two years.
  • The cyber threat looms and geopolitics remains a concern. As digitalisation of buildings increases so do the entry points for criminals, leading to 72% saying that cyber was among their greatest insurable risks. 65% said that geopolitical risk was an increasing concern.
  • At risk but under protected. 66% said that they have been significantly affected by climate related loss yet only 10% globally are certain that they have enough insurance in place to protect them against the impact of an extreme weather event.
  • A climate disconnect. Real estate is expected to play a major role in efforts to reduce energy consumption and decarbonise the economy yet 68% reported that a lack of data was among the greatest challenges with only 31% responding that they had robust processes in place to collect the environmental and emissions data needed.

Garret Gaughan, Head of Direct and Facultative at WTW, said: “The road to recovery is not without its challenges but it’s clear that real estate managers and investors are taking the long view and have identified reasons for optimism in a still turbulent market. Our post-pandemic way of working and shopping has inarguably impacted the real estate landscape but many firms are undeterred, finding a competitive edge through environmental and technological means.

“But with change comes risk and firms are still struggling to obtain full visibility of their risk factors making it more essential than ever that businesses work with partners that can help to identity, assess and quantify what could be on the horizon in 2024 and beyond.”

The complete survey report can be downloaded here.