Commercial real estate representatives (retail, business centers and offices, logistics spaces) estimate, in a proportion of 80%, a revenue increase this year compared to 2021, and 73% expect transactions activity to intensify over the next 12 months, according to the Deloitte 2022 Commercial Real Estate Outlook global study. At the same time, given that the global M&A activity increased by about 85% in the first half of 2021 compared to the previous year, 40% of the companies participating in the study said they could get involved in such transactions in the coming quarters.
According to the study, revenue prospects differ among property type. Thus, companies that own buildings used in the digital economy (data centers, cell towers or industrial spaces) have even better revenue prospects this year compared to those in other areas. Even office, retail, and hospitality respondents showed some optimism over the short-term.
Under these circumstances, many companies are focusing on retrofitting properties and repurposing spaces for alternate uses to maximize their value. However, only one-quarter of them are substantially increasing technology investments to strengthen portfolio and asset management capabilities.
"The real estate market is usually sensitive to economic conditions and the commercial sector even more so. In addition, in a high inflation environment, such as the one we are going through now, real estate attracts funds looking for investments that protect the value of money over time. Therefore, even if the rental market does not perform favorably in terms of yields, investors will look for assets whose value is not eroded by inflation, and commercial real estate may fall into this category. As far as the local market is concerned, after the 2021 record for land transactions, we expect real estate project developments as a consequence. Bucharest continues to concentrate most of the real estate transactions in Romania (67% of those concluded in the first half of 2021, mainly related to office buildings and hotels, according to NBR data), but the appetite for other regions of the country is obvious," said Alexandra Smedoiu, Tax Partner, Deloitte Romania, and Real Estate Industry Leader.
In terms of the workforce, organizations should continue investing in digital tools to support remote work and focus their recruiting efforts on employees with technology skills, the study highlights. Two-thirds of respondents revealed their companies plan to be completely or partially virtual going forward, although more than half believe long-term remote working would negatively impact productivity. In contrast, about 60% feel a remote working option would help their company compete for talent.
Another challenge to which companies need to respond in the coming period to meet investor, tenant, and employee expectations is the one related to ESG (environmental, social, and governance issues). 60% of respondents believe that ESG initiatives are driving new business opportunities for their organization, and half think such initiatives are giving them a competitive advantage.
On the other hand, 80% of the companies said they did not have a fully modernized core system that could easily incorporate emerging technologies, which limits their progress and ability to innovate.
The Deloitte 2022 Commercial Real Estate Outlook studywas conducted among 400 commercial real estate companies with assets of over $ 100 million each, equally distributed among three regions - North America, Europe and APAC.