Savills has forecast the key ESG, investment and leasing trends for 2022 in 36 cities around the world as part of its 2021 global Impacts research programme. The international real estate advisor predicts that, globally, tech occupiers are set to dominate leasing activity, offices will be the most popular investment sector, prime real estate yields are set to remain largely static, and Asian cities are seemingly lagging behind others around the world when it comes to prioritising sustainable investment.
Key findings include:
Simon Hope, Head of Savills Global Capital Markets, comments: “Based on G7 assumptions, 2022 should herald a return to business as usual for real estate markets around the world. According to our researchers, it appears that normality should return to the office sector too, both in terms of leasing - where tech occupiers are predicted to be particularly active - and investment activity, with yields potentially hardening in some areas. In the residential and industrial fields, both of which have benefitted from lockdowns, we see continuous prosperity for investors. With the vaccine rollout and the assumption that business travel resumes, this is likely to lead to more international demand, which, when combined with existing domestic demand, is expected to result in a further strengthening in pricing and capital values. Assuming the bond market remains resilient we anticipate demand and pricing in the sustainable sectors to improve. Based on high levels of Government expenditure on capital projects, from the USA to Europe, this could be a strong decade for investment.”
Sophie Chick, Director in Savills World Research team, adds: “It’s interesting that, in the opinion of our researchers, the reputational threat seems to be a higher motivating factor than seeking higher returns in pursuing an ESG-led investment strategy. Although some studies show that assets with high ESG credentials deliver higher rents and therefore better income returns, it’s still hard to separate out how much sustainability plays a factor here and how much is due to these often simply being the newest and best assets in their markets. This highlights the challenges for the industry in assessing the ‘green premium’. Nonetheless, the fact the vast majority believe that sustainable investment is here to stay is a good thing, and in those locations where it’s not currently top of the agenda, it’s inevitably only a matter of time.”
Fraser Watson, Director in Savills CZ&SK Investment Advisory, comments on the outlook: “It is encouraging to see how much positive outlook there is for 2022, which certainly reiterates what we are seeing and feeling within the Czech and Slovak markets. The uncertainty of the last 15 months is definitely lifting and we see investors in the market moving forwards with determination to get equity allocated. The ESG piece is becoming more important and it’s gone from being an outlier in the rank of criteria for investors to one of the first questions asked. How this plays out in terms of pricing is really yet to be seen; however, it's probable that the most ESG compliant properties will benefit from a (slight) premium, rather than properties that aren’t as ESG friendly being discounted. The office sector is gaining momentum and certainty as occupiers get clarity on how their requirements look like going forwards. The ‘return to the office’ of employees is well underway and this is giving investors comfort in the underlying fundamentals and longevity of the sector.”
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