Risky Business: Optimism among investors is growing but the road to recovery is paved with challenges according to WTW’s Global Real Estate survey

SINGAPORE, February 1, 2024 — Investor confidence in the once steady real estate sector has been shaken. A shift in the demand for office and retail space, coupled with inflation and a rise in interest rates, has left its mark. However, firms have entered 2024 with a feeling of optimism, more so than market headwinds would suggest, with a focus on the property technology (proptech) revolution and innovations such as smart buildings. This is according to the latest Global Real Estate Risk Outlook Report released by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.

The report canvassed views from 350 companies from around the world, including in Asia Pacific (APAC), from property investors to asset managers and pension funds. The analysis not only uncovers the evolving significance of risk management practices but also delves into the contemporary challenges and opportunities inherent in the real estate business landscape.

Key findings in APAC include:

• Hope on the horizon. 55% Over half (54%) of firms believe their assets will increase in value overall in the next two years with 68% positing that rental rates will improve despite one of the deepest market downturns in recent history.
• Confidence in technology is strong. . Proptech and AI could be transformational with 60% reporting that property technology was among their greatest opportunities over the next two years.
• The cyber threat looms, public liability and geopolitics pose the greatest risk to their organisations. As digitalisation of buildings increases so do the entry points for criminals, leading to 71% saying that cyber was among their greatest insurable risks. About two-thirds said that public liability (68%) and geopolitical risk (65%) were increasing concerns.
• At risk but under protected. Over half (55%) said that they have been significant or very significantly affected by climate related loss. However, only 5% are confident in having sufficient insurance to mitigate severe impacts from extreme weather events. Almost two-thirds (63%) are uncertain about the adequacy of their insurance coverage.
• A climate disconnect. Real estate is expected to play a major role in efforts to reduce energy consumption and decarbonise the economy yet 69% reported that a lack of data was among the greatest challenges. Only one-quarter (25%) responded that they had the robust processes in place to collect the environmental and emissions data needed.
  
  As a result, real estate managers are also grappling with constraints that hinder effective risk management with a significant majority expressing the lack of internal risk management tools and insight (68%) to help them address their risks over the next three to five years.

Ben MacCarthy, Head of Real Estate, Hospitality & Leisure, Asia, at WTW, said: “Despite the market headwinds, the real estate industry remains very energetic in addressing these, turning challenges into opportunity. We found APAC firms pursuing innovative solutions through Proptech, with a focus on SMART buildings and improving ways data is accessed accurately especially to adapt to ESG and climate regulations.

“The findings of this survey also underscore the need for a strategic approach to enhancing risk management strategies, ensuring comprehensive data access, and securing insurance coverage. This becomes increasingly vital with the rise in frequency and severity of extreme weather events, growing cyber and geopolitical risks requiring a resilient and adaptable risk management framework.”

The complete survey report can be downloaded here: Global Real Estate Risk Outlook 2024.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you.