According to the authors of the report, the political and economic uncertainty of the past year will likely persist in key markets throughout 2019, yet real estate continues to attract capital and demonstrate its enduring appeal as an investment asset class. The acquisition of income-producing commercial real estate increased by 3 percent to $963.7 billion in 2018, the third highest annual total on record, after 2007 and 2015. The industry leaders canvassed for Global Emerging Trends all take comfort from the fact that there is lower leverage in the system and lower levels of supply in all regions than in previous cycles. But in light of the worsening economic backdrop to investment, pricing of core real estate — a long-running concern in all three of PwC’s regional reports — becomes more of an issue than ever.

The regional Emerging Trends in Real Estate reports, published towards the end of 2018, all show that obsolescence is a growing concern for asset owners across the globe, against the backdrop of rapid changes in technology, demography and social norms. Technology, particularly mobile technology, has put much more power in the hands of the consumer, which is driving change across all sectors. And as new generations become workers and consumers, different social values and choices are influencing where and how people work and shop — and underpinning the rise of the shared economy. Assets will need to be adapted to meet the needs of the people using them more effectively, or converted to entirely new uses. Real estate owners will need to become operational businesses, and learn very different skills than they required even five years ago.

The challenges do vary, according to sector, but all are affected by the possibility of accelerated obsolescence. Retail and hospitality have been in the eye of the storm for some time; offices are closer to the beginning of the revolution. The residential and industrial sectors seem to be more insulated from change because of the positive balance between supply and demand.
The question of what is a valuable asset today has become much more complex than it once was, across all sectors. It’s clear that to avoid obsolescence and remain relevant in the modern world, real estate will need to provide that amenity and experience that the ultimate end users require — be they office workers, shoppers or residents. Technology will be key in measuring feedback from people — both in terms of what they say they like about a building as well as how they actually use it in practice — and in creating a clearer link between new uses and value. Owners will need to forge closer ties with occupiers, to collaborate and analyze what’s working for the people using buildings, day in and day out. The owners who can assess how people want to feel about a building and fulfil that intangible demand will be the most likely to avoid their assets becoming obsolete.