PwC’s Real Estate 2024: Unveiling Emerging Trends

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Despite facing challenges like higher interest rates and limited capital, Canadian real estate companies express confidence in overall demand, attributing it to the country's immigration-driven population growth. The market is becoming more divided, leading companies to approach all asset classes with caution. In response to market pressures, businesses explore emerging opportunities, including debt funds. While some industry players adopt a measured approach to trends like ESG matters due to current challenges, others view it as an avenue to create value. The industry balances challenges with a long-term positive outlook.

The top real estate trends for 2024 include:

1. Costs, Deals, and Capital Markets:

  • Ongoing uncertainty in price discovery, with industry players cautiously assessing valuations.
  • Factors like higher interest rates, increased financing costs, and reduced capital availability impacting industry activity.
  • Companies responding by shoring up liquidity, exploring debt funds, and strategically repositioning portfolios.

2. ESG Strategy, Reporting, and Performance:

  • Evolution of the ESG agenda with shifting sentiment, but continued importance driven by regulatory developments.
  • Focus on environmental issues, climate change, and the upcoming adoption of ISSB standards affecting disclosure requirements.
  • Evidence suggesting ESG considerations as a strategic lever for business value creation, including risk mitigation and sustainable building benefits.

3. Deepening Affordability Crisis:

  • Growing concern about housing affordability, expected to deepen in 2024.
  • Policy changes at various government levels to streamline housing project approvals.
  • Emphasis on distinguishing between deeply affordable homes and attainable housing, with calls for creative measures and technology adoption to mitigate housing cost pressures.

Best Bets for 2024:

  • Industrial Real Estate:Caution regarding the outlook, but opportunities in manufacturing, warehousing, and niche areas like data centers.
  • Multifamily Residential Housing: Challenges in condo and rental projects, but solid fundamentals with opportunities in specific segments like student and senior housing.
  • Necessity-Based Retail Property: Improved sentiment, particularly in grocery-anchored developments and neighborhood/community shopping centers, ranking high for investment prospects.

The industry faces ongoing challenges, and companies are adapting by exploring new avenues, prioritizing ESG considerations, and navigating the evolving landscape of real estate trends.

Original article posted by PwC

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