Geopolitical Fragmentation Stresses Real Estate Market

GRI Chairmen’s Reunion discusses the broader global context impacting the real estate market

September 28, 2023Real Estate
Written by Helen Richards

With more than 700 leading real estate players in Paris for Europe GRI 2023, the opportunity arose for the Chairmen’s Reunion, GRI’s exclusive club meeting for GRI Retreat Level Club Members.

The club meeting welcomed the participation of GRI Club Founder & Chairman, Henri Alster, and was led by Discussion Provocateur, Philippe Dauba-Pantanacce, Executive Director at Standard Chartered Bank.

Global Economic Landscape

In the realm of the global economy, the meeting began with a discussion on the prolonged period of historically low interest rates to which the world had become comfortably accustomed. In the contrasting reality of today, impacts on the economy are abundant.

Combined with repercussions of the Russo-Ukrainian conflict, the global economy is experiencing persistent inflation, shifts in rate policies, collapsed international deals, and volatility in energy sectors. It is, unsurprisingly, a stressful time for financial markets.

The rise of influential countries and blocs like BRICS, G20, and oil-producing nations has introduced a growing fragmentation in the global economic and geopolitical arena. Among these developments, the slowdown of the Chinese economy has garnered particular attention.

China's economic deceleration has significant repercussions for the world economy. Reduced investments, decreased tourism, and constrained consumer spending from China could collectively exert a substantial drag on global economic growth.

As the world navigates these evolving dynamics, understanding the shifting power dynamics and economic interdependencies between nations and regions becomes increasingly vital for investors and businesses alike.

(Image: GRI Club)

Real Estate Strategy

Discussions suggested a common understanding that base interest rates have likely peaked, however uncertainty surrounding the optimal timing for real estate investments persists. 

If prices align with buyer expectations, this is normally seen as a green light. However, caution was advised, reminding investors that not every “cheap” opportunity represents a good deal, underscoring the need for discernment and thorough analysis.

Investors must make informed approaches, navigating with prudence and foresight, and evaluating individual property opportunities within the broader economic context. Furthermore, in recognition of the ever-changing dynamics of this context, emphasis was brought to the need for agility in order to accompany the rapidly evolving opportunities and risks.

Caution and concerns aside, the overarching sentiment was optimistic, with meeting attendees viewing the current phase as the beginning of a promising period for real estate investments.

(Image: GRI Club)

Asset Classes

There was consensus at the meeting regarding Residential real estate as a relatively safe investment due to consistent demand, and Hospitality was acknowledged for its strong performance over the past 18 months, as well as its continued relevance.

This was a stark contrast to the reported underutilisation of Offices that the industry is already familiar with. Fundamentals such as location are vital in the complex office sector, as well as building quality - grade A offices have a far healthier demand - and ESG factors.

It is increasingly essential to stay attuned to market trends and tenant preferences. Adaptability, including lease renegotiations and reevaluating lease terms, may be necessary, with flexibility at the forefront. As the industry witnessed, office culture changed remarkably quickly, and investors must keep up with these fast-changing trends and resultant impacts on commercial real estate.

GRI Retreat Level Club Members will be gathering for further discussions at the GRI Global Chairmen’s Retreat 2024, due to be held on January 18-21 in St. Moritz, Switzerland.

This annual forum is internationally renowned for gathering the highest level executives in the real estate industry, bringing a wealth of the most privileged insights and knowledge, and an opportunity to create real connections with fellow real estate leaders. Find out more here.

GRI Chairmen's Retreat 2024