Real estate business confidence and expectations of profitability have dropped to a low level, reflecting widespread industry concerns across an array of indicators for the business, political and real estate environments.
Emerging Trends in Real Estate Europe 2023 is the 20th annual survey by the Urban Land Institute (ULI) and PwC of European real estate sector leaders’ expectations for the year ahead.
The Urban Land Institute has over 46,000 members worldwide representing all aspects of land use and development disciplines. ULI has c.5,000 members in Europe across 15 National Council country networks.
Dublin is one of Europe’s Top Ten most active real estate markets, with capital inflows of €6bn for the year ended September 2022, up from €5bn the previous year. Dublin also ranks in the top half of the 30 European cities ranked for investment and development prospects, holding its position at 13th, similar to last year.
Joanne Kelly, who heads up PwC's real estate practice in Ireland, commented: “Despite economic uncertainties, Dublin continues to show attractive real estate investment and development potential. As the only English speaking country in Europe having a supportive business environment and with added demand post Brexit, we continue to see interest in Dublin as a location offering value and competitive returns for real estate investment.”
In Association with
Based on the views of over 1,000 real estate executives from across Europe, the consensus is that confidence in the availability of debt and equity has not been this low since 2012. Respondents believe capital coming into Europe from every part of the world is more likely to decrease than increase.
Respondents are most negative about the prospects for debt (70% expect decrease) and equity (63% expect decrease) for development, and debt for refinancing or new investment (64% expect decrease).
The rise in interest rates will create stress, for example related to the need to repair banking covenant breaches if values decline, significantly higher refinancing costs, and the potential requirement to sell assets in response to redemption requests for listed open-end funds.
From the development perspective, interviews indicate that projects slated for 2023 might be pushed back into 2024 or shelved entirely. This lack of new development is seen by some as a positive for existing assets and their owners.
Interviewee responses point to values dropping in 2023.
City rankings
Overall investment and development prospects for most of the 30 cities covered by Emerging Trends Europe have deteriorated since last year’s report.
For the second successive year, London remains the most favoured city in Europe for its overall prospects. Paris comes in second place, up from third position last year, followed by Berlin. Next come Madrid, Munich, Amsterdam, Frankfurt, Hamburg, Barcelona and Milan.
Kevin Nowlan, chair of ULI Ireland, said the market has shifted rapidly over the last few months with the outlook becoming more negative.
"Since we conducted the survey and interviews over the summer, which already showed highlighted deep concerns, the industry has become even more worried," he explained.
“There is still a lot of capital available to invest and mostly not in a hurry, waiting for the right opportunities to arise. For the industry to weather the storm, stock selection is key, in addition to a strong ESG focus, operational skillset and customer focus.”
Joanne Kelly added: “New energy infrastructure tops the 2023 sector rankings for the second year, followed by the life sciences sector and data centres.
“Various forms of housing dominate the top 10 sector rankings, varying from retirement/senior living to social and affordable housing. Across Europe, there is also more concern about housing, with the lack of supply increasing political uncertainty around policy.”
