Tomorrow: Real estate takes the long view

Eleventh thought leadership report from CMS reveals the sentiments and speculations of the real estate market

August 30, 2023Real Estate
Written by Helen Richards

In the midst of numerous uncertainties regarding real estate investment, GRI club partner CMS surveyed 270 real estate professionals in the UK along with over 1,000 global real estate investors to gauge opinions on both short and long term market issues. 

Topics assessed included returns and financing, regional and asset class preferences, sustainability and technology, and future planning.

The resulting report also involved a number of one-on-one interviews, including with GRI Club member, Jay Kwan, Managing Director at QuadReal, as well as other senior leaders from APG, M&G Real Estate Asia, AustralianSuper, and Hines.

Read CMS’s extensive thought leadership report here: Tomorrow - Real estate takes the long view.

The Big Picture

While investors see potential in the current decline in real estate values as a buying opportunity, they remain cautious due to ongoing corrections. Their optimism lies in the long term, leading to a cautious short-term approach with a noticeable influence on recent deal levels and valuations.

Finance is a prominent worry for these investors, with interest rates and the stability of global banks being key concerns, as well as the possibility of limited access to capital.

Interest rates edging higher and higher may result in more forced sales as investors struggle to afford refinancing options, exemplified by current reports of defaults and discounted asset sales in the US. These developments serve as a cautionary signal for potential market-wide issues impacting valuations.

Other Headline Concerns

Unsurprisingly, investors are worried about prevailing inflation rates, with 95% expressing concern over the potential long-term impact on their investment portfolios. The high costs of energy are also a significant concern, worrying 97% of investors. While energy prices have fallen substantially from their 2022 peaks, they still remain significantly higher than two years ago.

Financial strains, partially due to these high energy costs, have led to increased tenant vulnerabilities, a concern for 93% of investors surveyed. Furthermore, 55% of investors have witnessed a rise in tenant failures over the past year. 

Ongoing global conflicts are another worry for 93% of investors, with 48% expressing significant concern. Aside from the direct impacts of conflicts, investors are apprehensive about the potential effects on supply chains, energy prices, and the broader economy. 

However, they also recognize that conflicts could reshape the real estate asset market, presenting both challenges and opportunities, such as increased demand for industrial or logistics properties due to reshoring trends driven by security and supply chain considerations.

95% of investors express concerns over the potential long-term impact of inflation on their investment portfolio. (Photo: torianime | Envato)


Global investors hold an optimistic view of returns in the medium to long term. Their median expected return in five years is 6%, a notable improvement compared to the average of 4% they foresee over the next 12 months. This positive figure underscores their enduring confidence in real estate as an attractive investment opportunity and stands in contrast to more pessimistic predictions about the sector's future.

Global Cities

The most classically global cities, including London, Paris, Tokyo, and New York, retain their appeal among investors, albeit with narrow leads. During periods of uncertainty, investors tend to gravitate towards major cities to seek quality and security during economic turmoil. In the present circumstances, stability is a highly valued attribute.

The View from the UK

In terms of sentiment, 38% of UK respondents express optimism about the market, while 34% hold a neutral viewpoint, and 28% lean towards pessimism. A significant majority (76%) of those surveyed anticipate that the UK investment market will rebound to its previous peak by the close of 2026. Likewise, 73% believe that the ongoing value correction presents a favourable buying opportunity. 

Although still positive, this perspective on the market is more guarded than the sentiment observed a year ago, aligning more closely with levels seen at the pandemic's onset, as the heightened optimism of the last two years moderates. A significant portion of respondents remain concerned about inflation, rising interest rates, the cost of living, and the instability of global banks.


In the last eight years, only 2021 posed a challenge to the established norm, primarily due to post-COVID market speculation. In the latest poll, 62% of respondents consider London to be overvalued, while only 6% deem it undervalued. These figures reflect the most pessimistic outlook since the period before Brexit.

Although only ahead by a slim margin, London remains the foremost global city for international investors, with a total 78% finding it appealing (and 40% finding it very appealing). Many investors who regard it as overvalued still desire prime London property in their portfolios. 

John Cumpson, a CMS real estate partner, emphasises that while transaction volumes in London have decreased, the market remains active due to a continued interest in high-quality assets, driven by tenant demands for modern amenities and sustainability. 

London remains the foremost global city for international investors, with 78% finding it appealing. (Photo: Mint_Images| Envato)

Other UK Cities

Manchester remains top of the rankings for other cities in the UK, with 58% of the country's investment professionals considering it to be the top choice. There is also a noticeably widening gap between Manchester and other regional cities.

Despite being the last among the top six cities considered, Glasgow stands out with a consistently upwards trend since 2016. Chris Rae, a CMS partner in Glasgow, highlights this positive trend, noting that Glasgow has significantly closed the gap with Manchester. 

A comparison between the two cities is often drawn due to their robust transportation connections and high-quality talent pools, suggesting that there are promising opportunities yet to be explored in Glasgow.

Asset Classes

Considering the significant supply and demand imbalances in the market, the selection of ‘living’ asset classes as strong favourites among professionals comes as little surprise. This year's rankings see the private rented sector (PRS) in the top spot, surpassing residential properties, which led the table last year. 

Student housing has rebounded from its initial pandemic-related setback and achieved its highest-ever score in this year's assessment. Demand in this sector continues to outpace supply, enhancing the allure for developers and investors. 

Distribution and logistics, healthcare, senior living, and life sciences show slight decreases in appeal but remain sturdy, influenced by long-term demographic trends. Hotels and leisure properties have witnessed a rollercoaster journey, recovering remarkably from the COVID-19 downturn. 

A notable trend highlighted in both the global and UK data is the diminished enthusiasm for office properties, with sentiments returning to their pre-pandemic numbers. This demonstrates a substantial decline in the optimism seen in 2020 when 50% of investors rated the sector as “very appealing.” 

Retail has consistently ranked at the bottom of the survey since 2016 - and this year is no different - yet it secured its second-strongest score in eight years, reflecting a partial resurgence in physical retail with the easing of COVID restrictions.

On a global scale, every asset class enjoys considerable appeal among investors, and variations in sentiment appear less pronounced from this international perspective when contrasted with what is witnessed at the local level. 


In the short term, there's a consensus that accessing financing is becoming more challenging, with 70% of UK real estate professionals believing that debt accessibility will be tougher in the next 12 months. 

The most anticipated consequences of restricted debt flow are forced property sales (60%), the injection of additional equity (53%), and a rise in distressed property owners (48%). Even when debt is available, businesses might struggle to secure it under favourable terms, but those that do will have a significant advantage.

This environment could also foster opportunities for non-traditional lenders. Their quicker execution speed could provide an edge over banks. Around a decade ago, research highlighted the growth and diversification of non-bank lending in the aftermath of the Global Financial Crisis, and there are strong indications that this trend will persist and possibly expand further.


The survey results leave no doubt about the significance of sustainability in global real estate, with 98% of global investors considering environmental performance important, and 56% describing it as "very important." 

Although the importance of sustainability is recognized, practical challenges persist on the real estate sector’s path to achieving net zero. Key concerns include the timeline for achieving net zero, the magnitude of the challenge, the impact of the economy on net zero efforts, sustainable offices and certification requirements, and the technologies needed to achieve environmental goals.

An overwhelming 98% of global investors consider environmental performance important. (Photo: Fahroni | Envato) 

The data indicates that UK professionals believe it will take slightly longer for their companies to achieve net zero compared to their estimations from one or two years ago. Global investors hold diverse expectations for achieving net zero in their portfolios, with those in North America and Europe trailing behind the rest of the world.

Economic challenges have led to delays in net zero strategies for about 76% of global investors. Although the delay has been minor for the majority of those affected (78%), any delay is concerning for climate goals and investors whose green credentials hold importance for their business.


Technology is playing a significant role in the real estate industry, encompassing a wide range of innovations beyond attempts to achieve net zero goals. The adoption of technology in real estate includes intelligent security systems, the Internet of Things (IoT), AI-powered predictive maintenance solutions, virtual reality property tours, and the use of blockchain for cryptocurrencies, smart contracts, and tokenization in real estate transactions. 

While 88% of global investors believe that the real estate industry is keeping up with technological changes, the sentiment is more mixed in the UK, where only 50% of respondents feel that the industry is staying abreast of technological advancements, a decrease from 57% in the previous year.

Dominic Dryden, a partner in the CMS technology team, emphasises the value of data-driven and AI-powered technology in the real estate sector. However, the integration of innovative technologies like big data and AI can also introduce unique legal challenges that must be addressed by real estate stakeholders.

Future planning
The consensus in the UK is that the planning system is not functioning effectively and is under-resourced. An overwhelming 90% of respondents believe that the system is causing delays in real estate development, and 93% consider it to be under-resourced. 

Last year's report emphasised the importance of "levelling up" to create a sustainable future for towns and cities, but the effectiveness of the government's efforts has remained a subject of debate. This latest report shows that 73% of UK professionals expressed the view that the government hasn't allocated enough commitment to the levelling up agenda.

The full and extensive thought leadership report, including numerous one-on-one interviews with senior players on the real estate scene, can be downloaded here: Tomorrow - Real estate takes the long view. With a presence in 44 countries, CMS offers deep local market understanding with a global perspective.