European Living Sector Outlook 2024

ESG AND REPURPOSING

KEY ELEMENTS IN THE LIVING LANDSCAPE OF 2024

ESG remains a pivotal theme that will shape living markets not only in the coming year but well into the future. For numerous real estate stakeholders within the EU, aligning with its taxonomy¹ of sustainable activities will be a central goal to ensure that their endeavours align with the objectives set by policymakers and investors alike. As investors increasingly recognise the necessity for and value of ESG in the real estate realm, such alignment is certain to gain even greater significance. Moreover, environmental legislation in both the EU and the UK, focused on enhancing the energy efficiency of housing markets, will help transform both existing and new properties, thereby inching closer to achieving carbon neutrality. Lastly, if there's a sector in the built environment where the influence of social factors is arguably most potent, it is in the living sector. The significance of where and how we live extends beyond our health and well-being; it also plays a pivotal role in addressing many of society's major urban challenges in the years to come. A notable opportunity could be the exploration of potential strategies for repurposing current real estate assets for residential use. In recent times, Cushman and Wakefield's ground-breaking research on office market obsolescence has brought attention to the fact that this challenge poses risks, but in the context of the living sector, it also opens up opportunities to transform surplus office space in the coming decade.

Progress in real estate repurposing across EMEA has been understandably sluggish due to the unpredictable macro landscape, uncertainties surrounding future office demand, the viability challenges discussed earlier, and regulatory and architectural obstacles. We believe there are no instant remedies for many of these challenges, although the relatively more favourable outlook for capital markets we anticipate in 2024 should help. Nevertheless, we still consider repurposing as a crucial aspect of resolving many of the existing supply-demand imbalances in living markets across EMEA. We expect it to evolve as a prominent theme over the next decade, particularly as capital market conditions improve and the hybrid working landscape becomes more defined. ¹ Taxonomy refers to what the EU has defined as sustainable activities. By aligning with that taxonomy it ensures real estate asset managers can still capitalise on future investor capital flows aimed at sustainable property investment.

As investors increasingly recognise the necessity for and value of ESG in the real estate realm, such alignment is certain to gain even greater significance. "

10 LIVING OUTLOOK 2024

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