Reimagining Real Estate 2024

Introduction The growth of institutional investment in real estate, which dates back to the mid-20th century, has reshaped cities and economies and raised the profile of real estate to one of significant, systemic importance. In 2022, all global real estate (residential and commercial real estate plus agricultural land) totalled $379.7 trillion, making it more valuable than all equities ($98.9 trillion) and debt securities ($129.8 trillion) combined and almost four times that of global gross domestic product (GDP) ($100.6 trillion).1 Given the sector’s scale, scope and its foundational role in business and social activity, broader market stability is reliant on a well-functioning and well-capitalized real estate ecosystem. Previous economic shocks, such as the 2008 global financial crisis, when banks were over-exposed to a range of real estate debt, underscore its systemic importance and the influence of real estate capital markets on both Wall Street and Main Street. Pension funds, insurance companies, sovereign wealth funds and other large institutions have sought exposure to real estate to hedge inflation, provide diversification from equities and fixed income, and generate reliable income streams. Even amid surging inflation and an unprecedented velocity of interest rate hikes, real estate broadly delivered on these investment theses, and long- term allocations to the asset class remain stable as inflation has subsided. Buffeted in recent years by changing patterns of space use – a phenomenon especially prominent in the office sector in Western economies – and abrupt swings in capital markets, the sector is now on the cusp of unprecedented renewal. That renewal will depend on substantial reinvestment in public and private spaces, a sharper focus on sustainability and resilience, and prioritization of affordability and liveability goals. What’s changed: The 2021 framework necessarily addressed the immediate challenges presented by the COVID-19 pandemic, including a dramatic decline in commercial real estate development and investment activity. Looking past the COVID-19 pandemic, the framework also presented the crisis as a catalyst for investment in liveable, sustainable, resilient and affordable real estate.The value of real estate assets exceeds global debt and equity markets combined, making it the world’s most significant store of wealth. $379 trillion The value of global real estate in 2022 – more than all equities and debt securities combined. Vision for the future of real estate: key pillars FIGURE 1 Affordability Inclusive and accessible spaces that minimize the effects of inequality and support access to economic opportunity and social capitalSustainability Resource-efficient and decarbonized spaces that deliver environmental, economic and social benefitsLiveability Human-centric and smart spaces in support of health, well-being, equity and productivityResilience Future-proofed cities and buildings that mitigate and are prepared for a wide-range of risks, from environmental to economicKey pillars Source: BCG, based on discussions with World Economic Forum partners. Reimagining Real Estate: A Framework for the Future 5