Covid-19 Cannot be Compared to Downturns of the Past

The Emerging Trends in Real Estate Europe report was published earlier this week by the Urban Land Institute and PwC. For much of the past two decades, this annual report has ranked 31 European cities in terms of investment and development potential, in addition to ranking the likely prospects of sectors within the broader industry. This particular annual publication has gained credibility across the industry due to its multidisciplinary approach; unlike the branded industry reports that tend to surface every quarter or in response to a crisis, the ULI report surveys funders, investors, property developers and agencies across Europe.

In this most recent edition, Dublin ranks as the sixth best European city, of the 31 surveyed, for real estate development. Across all key metrics, Dublin is now ranked in 11th place overall, which is an improvement on last year’s 12th place ranking. Perhaps unexpectedly London, Paris, Berlin, Munich and Frankfurt each feature in the top five for development.

While this is a comprehensive report and one that is worth reading in full here , the headline trends emerging for the Dublin market include continuing strong demand for private rental residential and student housing, and the prospect for investment in Dublin remains “favourable”. 

According to the PwC/Urban Land Institute report, in line with European trends, “the dynamics in Irish real estate have also shifted dramatically, amplified by the pandemic. COVID-19 has accelerated structural trends, seeing a change away from retail and office, towards the alternative sectors such as data centres, life sciences and health, energy and communications infrastructure. These areas, along with industrial property and logistics warehouses, will all benefit from growing demand in this new environment and a wall of capital we’re seeing ready to deploy”. That “wall of capital” is described elsewhere in the report as “pent-up capital waiting to be deployed” so it will be interesting to see which of these trends investors express confidence in.

One of the more interesting and arguably unexpected insights from this report is the momentum building across ESG, or Environmental, Social and Governance strategies, which “have gained far more interest” on foot of the pandemic. This trend was already well in play prior to Covid-19, however, the expectation was that more pandemic-responsive strategies would take priority in 2020. It is heartening to see that the pandemic response has actually reinforced and strengthened ESG strategies, facilitated by technology: “With many already committed to reducing the environmental impact of the built environment, executives surveyed now see a growing importance for the social aspects of their strategies. 2020 has also seen the real estate world begin to evaluate its wider role in society more seriously – from addressing diversity and inclusion in the workplace to a far greater emphasis on the environmental, social and governance agenda. Although almost eight out of ten (79%) survey respondents are concerned about ESG issues, real estate leaders agree that the industry will play a pivotal role in delivering sustainable places that improve health outcomes for society. 69% of survey respondents said that by far the greatest difference they can make through impact investing is creating sustainable buildings.” This is a stark demonstration that the impact of Covid-19 is not comparable to downturns of the past and, with that in mind, it is reasonable to expect the recovery to take a different shape than previously seen. 


 

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group