Third of property execs predict ‘negative impact’ from trade headwinds
A third of property development executives are expecting a “negative impact” from uncertainty around cross-border trade policy, according to a new report.
The report by Altus Group, which consulted more than 400 property executives globally, reveals trade tensions are one of the key factors expected to add to cost pressures, exacerbated by the UK’s impending exit from the EU next March.
The respondents were asked to rate current market trends as either positive or negative, with trade policy emerging as one of the most potentially disruptive.
A third of property development executives are expecting a “negative impact” from uncertainty around cross-border trade policy, according to a new report.
The report by Altus Group, which consulted more than 400 property executives globally, reveals trade tensions are one of the key factors expected to add to cost pressures, exacerbated by the UK’s impending exit from the EU next March.
The respondents were asked to rate current market trends as either positive or negative, with trade policy emerging as one of the most potentially disruptive.
Overall, 34% of respondents – who were based mainly in the US (24%), followed by Canada (17%), Australia (15%) and the UK (12%) – said trade policy was most likely to negatively impact their future pipeline of work, with 35% saying changing real estate occupation habits would be the most challenging, while fewer respondents thought rapidly changing transportation technologies would have the biggest effect (27%).
The overwhelming majority (92%) said housing affordability would be the most positive factor, followed by immigration (79%) and environmental regulation (76%).
When asked to name the biggest challenges stemming from these market forces over the next five years, the respondents highlighted project cost escalation (68%), as well as trade and labour shortages (65%) and the development approval process (60%).
In the UK specifically, labour and skilled trade worker shortages emerged as the greatest concern, along with overall cost escalation pressures.
Approximately one quarter of London’s construction workforce is already made up of migrant workers – who are now facing an uncertain post-Brexit future – and trade unions are campaigning for wage increases, which will further increase construction costs.
Despite the challenges, Altus Group chief executive Robert Courteau said development leaders were also eyeing “significant opportunities” to manage risk through “a number of future-ready strategies, including investments in technology and performance management along with consideration of new ways of managing and financing projects”.
In terms of investment strategies, the report shows that 74% were planning to carry out (or are already carrying out) market expansion, while half are planning to make (or are already making) changes to their portfolio mix, while 62% are mulling joint venture partnerships to develop projects.
With regards to their assets, 85% of respondents are planning or already making changes in building design, and 67% plan to adopt (or have already adopted) advanced construction technologies.
Furthermore, 10 years on from the global financial crisis, the fundamental change in the international real estate lending landscape is evident.
The survey response on sources of financing demonstrates a profound change in how development is funded.
Just under half of those surveyed are using traditional or institutional lenders for financing. Meanwhile, 82% are using at least one form of alternative financing. Further, more than 45% have indicated they are considering, planning to use or are already using some form of alternative financing exclusively.
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