New barometer on the morale and confidence of real estate and city players

As every year for the past 7 years, EY and the Palladio Foundation draw up, through their annual study "panorama of real estate and the city", an economic inventory, including a section on its development prospects. A few days before MIPIM, the unmissable international trade show bringing together all the players in the sector, this exclusive survey takes the pulse of the morale of those who make it live and exist. Between November 2022 and January 2023, 515 leaders representing 8 sectors of activity*, and 38 federations and partner organizations, were thus questioned: What is their level of optimism? What are their concerns? Which asset classes are boosting their confidence and which ones are they worrying about? What is the future of this great industry?

The main lessons of this moral barometer

52% of executives are “optimistic” about their 12-month outlook, compared to 84% at the same time last year

Against a background of sluggish growth, managers are less optimistic than in 2022. The sector indeed shows mixed results in 2022 with +0,9% growth[1], below those prevailing for the whole the national economy (+2,6%)[2] and the performance recorded between 2020 and 2021 (+6,2%)[1]. 52% of executives surveyed say they are “optimistic” about their 12-month outlook, compared to 84% at the same time last year.

Top concerns: rising material costs, rising interest rates and rising energy prices for 49%, 46% and 37% of managers respectively.

The reasons for concern nevertheless suggest that this climate is more cyclical, particularly in connection with the global geopolitical situation, than structural.

Healthcare real estate, logistics, hotels: 3 asset classes driving up confidence

With a confidence level of 57%, 53% and 49% respectively, healthcare real estate, logistics and hotels occupy the first 3 steps of the podium. Managers have faith in assets that are structurally in demand and undergoing profound transformation, such as healthcare real estate. In contrast, the hotel industry is benefiting from a post-Covid rebound and the very good performance of French tourism in 2022, while business property is adapting to new international supply chains and the growth of e-commerce.

Offices (30%) bring up the rear in connection with deep uncertainties (change in take-up, consequences of the hybridization of work), as well as housing (particularly new, 28%) where a fall in demand is added to the lack of supply (notable for several years), particularly given the rise in interest rates.

A level of confidence and optimism that varies according to the typology of the sector of activity of the sector

Expertise and advice; engineering and technical services; construction of buildings. Despite lower levels of optimism compared to 2022, the leaders of these three sectors remain confident for the future with 77%, 69% and 65% confidence levels.

Investment and financing; architecture, town planning and development. Given the uncertain context, the leaders are cautious while remaining rather positive and display a confidence rate of 58% and 56%.

Marketing, management and real estate development are more directly affected by the increase in production rates and costs and record a sharp drop in the level of confidence of their leaders with 52%, 38% and 33%, i.e. an average drop of 43 points compared to 2021.

In the sights of 3 out of 4 managers, the ecological transition is part of the new industrial revolution in the sector

The profound environmental transformation of the sector represents both a colossal challenge and an opportunity for all players in real estate and the city, while the built environment represents 43% of final energy consumption and 23% CO2 emissions in France[3]. For three-quarters of them, the ecological transition will be an opportunity to structurally or substantially modify their strategy.

Discover here the complete results of the study (economic inventory and survey).

This study is the 2nd episode of a series of 3 opuses. A first episode "The real estate industry and the city to conquer talent" was published in mid-February, to be found here. The 3rd and last episode will be published in June 2023 and will deal with the complex transformation of the sector, particularly in the context of environmental transition.

*: Architecture, Urban Planning and Development; Marketing; Construction ; Expertise and advice; Management ; Engineering and Technical Services; Investment and Financing; Real estate development.

[1]: Source: Panorama of real estate and the city EY / Palladio Foundation

[2]: Source: INSEE

[3]: Source: Ministry of Ecological Transition and Territorial Cohesion