Interest rates and construction costs are the most critical issues facing the commercial property industry this year in North America and Europe, according to a survey from the Urban Land Institute and consulting firm PwC.
In North America, 94% of survey respondents said interest rates are a significant issue this year, a major increase from 2023, when 69% said the rate was a big concern. In 2024, construction material costs and labor availability also are among top issues causing concern, according to the Emerging Trends in Real Estate Global Outlook 2024.
ULI and PwC interviewed and surveyed senior property professionals in the United States, Canada and Europe for the recently released global and regional editions of the Emerging Trends report.
In Europe, interest rate movements topped the list of concerns among commercial property professionals, with 86% of survey respondents saying it is a significant issue, according to the ULI-PwC report.
However, the importance of interest rates as a concern in Europe dropped from 2023, when 98% of respondents listed it as an issue. Inflation ranked as the second-biggest concern among European respondents in 2024, with 83% saying it will be an issue, according to the report. Construction costs and resource availability ranked third and the potential escalation of Russia's war with Ukraine fourth.
While respondents said interest rates probably have hit a high point and may be cut this year, they are realizing that money is more expensive, the report said. "The hope is that buyers and sellers of properties are starting to accept a higher-for-longer interest rate environment and will therefore find the middle ground on pricing that has been so elusive over the past two years," ULI and PwC stated in the report.