Just as stability in the real estate capital markets is an essential condition for investment, sovereign fiscal stability is also necessary to drive investment in real estate. Global cities are at a pivotal point as they navigate an increasingly complex and dynamic environment characterized by rapid urbanization, evolving demographics, climate challenges and technological advancements. To maintain competitiveness, enhance resilience and create an enabling environment for real estate investment, cities must prioritize key areas such as infrastructure, governance, housing affordability and sustainability. These areas require significant public funding along with the ability to attract private capital. According to a recent report by PGIM, 53 cities across the US lack adequate funds to cover their bills,4 and both China and the UK have struggled with municipal financing challenges.The World Economic Forum’s 2022 report, Rethinking City Revenue and Finance, highlights critical financial obstacles, including limited local revenue sources, dependency on intergovernmental transfers and challenges in mobilizing private investment. This reliance on external funding can create vulnerabilities, as such funds are unpredictable or politically influenced. Moreover, urban infrastructure needs, driven by rapid population growth and climate resilience goals, further strain budgets and complicate long-term financial planning. Mitigating these fiscal challenges requires cities to adopt diversified revenue sources and innovative financing models. For example, cities can expand their tax bases through property and land value capture mechanisms, such as development rights charges or tax-increment financing. By leveraging these approaches, cities can create more resilient and sustainable fiscal frameworks to support long- term growth and development. 2.2 The role of fiscal stability in urban investmentIn Europe, the commercial real estate market is grappling with economic uncertainty related to energy costs, the monetary policy response to inflation and geopolitical risks. However, prime assets in major cities such as London, Paris and Berlin continue to attract capital, particularly from institutional investors seeking safe-haven investments. In the Asia-Pacific region, the outlook is mixed. Markets such as Singapore and Sydney are benefitting from robust demand for logistics and office space, while emerging markets like India and Viet Nam are seeing increased interest from foreign investors seeking growth opportunities. However, concerns about an economic slowdown in China, rooted in a downturn in the residential real estate sector and over-levered developers, are tempering optimism, particularly in the office and retail sectors. The global commercial real estate capital markets are poised for a period of gradual recovery and stabilization as interest rates moderate and investor sentiment improves. While the challenges of the past few years have reshaped the investment landscape, they have also created opportunities for those willing to adapt to new realities. Moving forward, investors will need to be agile, focusing on sectors and regions that offer resilience and growth potential. Through innovative financing structures and embracing sustainability, the commercial real estate industry can navigate this transitional period and emerge stronger in the years to come. The outlook for commercial real estate capital markets is ultimately one of cautious optimism, with a recognition that the path to recovery will be uneven and subject to ongoing economic and geopolitical uncertainties. Nonetheless, for investors with a long-term perspective and a willingness to embrace change, the opportunities in global real estate remain compelling. The global commercial real estate capital markets are poised for a period of gradual recovery and stabilization as interest rates moderate and investor sentiment improves. Reimagining Real Estate: A Framework for the Future 18

Reimagining Real Estate 2024