Real estate investors are increasingly keeping a nervous eye on events in the Russia-Ukraine war.
So says the Emerging Trends in Real Estate Global Outlook 2022 report just issued by the Washington-based Urban Land Institute.
A summary of the report notes that investor attention has for the most part “dwelled on the immediate effect of the conflict on already surging energy prices, leading inevitably to inflation lasting at higher levels for longer.”
Additional challenges may be seen simply in the sudden absence of very recent boom times: “A huge release of pent-up demand led to record volumes of investment transactions as economies reopened during 2021.”
That level of activity, contends the report, is unlikely to be repeated any time soon.
To make things even more problematic, central banks across the globe, led by the Federal Reserve, earlier this year signaled moves to tighten monetary policy as a means of checking inflation, but now such moves suddenly seem less likely, certainly in Europe.
“The industry still clings to the familiar pro-real estate investment criteria—property as an inflation hedge and the premium between yields and interest rates,” says the document, but the real challenge may now be that inflation could rise like a rocket “outside the influence and control of the central banks.”
The Urban Land Institute report, in conjunction with the company PricewaterhouseCoopers, was aired at the annual International Market for Real Estate Professionals conference in Cannes.
At that conference, Gareth Lewis, director of PwC Real Estate, remarked that coming out of the pandemic, real estate investors had exhibited “generally higher levels of confidence.”
The onset of the Russia-Ukraine war, however, said Lewis, “has created a new and more sharply focused cause for immediate concern particularly around rising inflation and interest rates, giving rise to stresses that the real estate world has not had to grappled with in earnest for decades.”
By Garry Boulard
