Tim Coy, Research Manager for the Commercial Real Estate Industry at Deloitte, recently discussed the findings of their Global Real Estate Outlook Survey. The survey revealed that in recent years, the commercial real estate industry has faced challenges such as high interest rates and inflation, changing space usage trends and climate change-related hazards. As a result, many organizations have taken defensive measures to strengthen their balance sheets and focus inward.
However, there is optimism for change in the next 12-18 months. The survey reported reasons for this optimism including avoiding recession and a decrease in inflation rates. While single rate cuts may not lead to an immediate increase in loans or acquisitions, respondents are hopeful that 2025 will bring potential recovery.
Coy also mentioned that leasing conditions should improve along with capital markets and lending conditions which will boost overall performance of assets and investments.
In terms of technology usage within CRE industry , Coy noted that there has been a lag compared to other industries but this could be changing soon. According to the survey report , 81% of respondents said they plan on focusing spending on data and technology by 2025 . Additionally , artificial intelligence (AI) solutions are being adopted by more companies with a significant year-over-year increase from previous surveys . Early adopters are using AI primarily for accounting purposes while those who have been using it longer focus on financial planning/analysis or property operations .
However , implementing new technologies does come with its own set of challenges such as data readiness/security/confidentiality issues due to lack standardization within real estate data . This can lead incorrect results from AI-generated content which can impact business decisions negatively .
Sustainability remains an important focus within CRE due climate-change related hazards . Companies must find ways mitigate these impacts while meeting financial goals according Deloitte’s report “How can real estate companies best position their properties?” Sustainability is no longer just compliance-driven mandate ; only16% invest sustainability solely because regulations require it . 36% of respondents take a more balanced approach with modest financial returns while following regulatory requirements. On the other hand , 22% believe sustainability is embedded in their organizational DNA and will yield long-term benefits.
Despite cautious optimism, there are still some concerns mentioned by survey respondents such as elevated interest rates, potential changes to tax policies including enforcement of Pillar Two (15% global minimum tax), upcoming elections in multiple countries which could have implications for social/fiscal policy and cost of capital especially with upcoming debt maturities for commercial mortgages .
Overall , Coy believes that there has been a shift from defensive postures to more strategic offensive strategies within CRE industry . It’s important for professionals make informed decisions based on long-term growth horizons and prepare active property management.
