In 2024, the European real estate market will show a number of new trends

In this context, the PwC and Urban Land Institute report provides important insights into the outlook for the European real estate market in 2024 and beyond. In the context of changing interest rates and economic fluctuations, survey respondents are hopeful that the economic situation will improve over time, leading to an increase in transactions. However, it is worth noting that each market in Europe has its own unique characteristics and there will be no one-size-fits-all scenario for all regions.

Special attention is paid to segments that promise stability and resilience in a recessionary economy. Leading asset classes based on global megatrends such as decarbonization and technological transformation are becoming a priority for investors. Against this backdrop, the influence of ESG (environmental, social and governance factors) is becoming increasingly visible. Implementing sustainability principles not only meets the current demands of society, but also helps to balance profitability and long-term needs.

Occupiers and investors are increasingly looking for quality spaces that can adapt to new working practices and ensure long-term viability.

At the same time, the rapid development of artificial intelligence and rising construction costs continue to impact the real estate sector. As companies look to improve the quality of their spaces, there is a growing consensus that priority should be given to facilities that take into account not only commercial interests, but also long-term sustainability goals. The real estate market is therefore at a crossroads, where leaders must consider both the current challenges and new opportunities arising from a rapidly changing socio-cultural environment.

In recent years, the importance of environmental, social and governance (ESG) issues in the real estate industry has steadily increased. This trend is driven by the recognition that sustainability and social responsibility are becoming important factors not only in shaping the image of companies, but also in creating long-term capital value. While the decarbonization process can create gaps in budgets due to high construction costs and labor shortages, more and more professionals in the industry are beginning to view ESG investments as strategic advantages, rather than just additional expenses. This is a paradigm shift, focusing on the added value such investments bring. Surveys show that 62% of respondents believe that refurbishment or conversion of buildings is a more efficient way to achieve a high-quality product compared to new construction, confirming the reticence of investors towards new projects.

The uncertainty in the market, reflected in the Emerging Trends in Real Estate® Europe report, shows that the industry is still struggling to adapt to the new economic conditions. A decade of cheap credit and globalisation trends that previously fuelled a boom in construction are now giving way to more cautious strategies. Market participants are embracing the concepts of discipline and patience, realising that rushing can lead to poor investments. According to one leading European investor, “there is no point in rushing”, highlighting the need for a measured approach to decision-making in an uncertain environment.

The discussion on this topic is particularly relevant given the opinions gathered as part of the survey, which involved 1,090 real estate professionals. These data indicate a profound change in the mindset of market participants: ESG investing is becoming not just a matter of conscience, but a sound choice that helps create sustainable and profitable assets in the long term. Sustainability and attention to social impact are now seen as key factors that contribute not only to reputational growth but also to real financial benefits, which is fundamentally changing the approach to the development of the real estate market.