Market Insight: The Commercial Real Estate Market In Turmoil

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Executive Summary

The commercial real estate market is being rocked by the current macroeconomic climate. Since the beginning of 2022, the MSCI World Real Estate Index has plummeted by 28%, and some properties have experienced valuation reductions of 50% as low office occupancy remains prevalent in an age of hybrid working.

It is not yet clear when the pain will stop: default rates are set to continue to rise, alongside central bank interest rates, while tenants continue to demand more from their workspaces to fulfil their net zero commitments. City planners, for their part, desperate to increase footfall, are expediting office transformations to other building use cases.

Smart building technology providers need to position their offerings to meet the key buyer demands of cost reductions through energy optimization, easy demonstration of decarbonization and ESG target compliance, and the creation of healthier workspaces to attract and retain talent. Vendors should look to this report to understand how they can capitalize in this real estate investment cycle, and best meet the needs of property owners and managers.

Table of contents

The commercial real estate market is in turmoil
Multiple shocks have hit commercial real estate in the last three years
With only the tip of the iceberg showing, it’s not clear where the bottom will be
How can smart buildings technologies stay buoyant in these unchartered waters?
New realities will shape CRE investments for years to come
Vendors must look beyond CRE

Table of figures

Figure 1. Monthly US manufacturing construction spend/product price index

About the authors

Harry Wilson

Industry Analyst
Harry is an Industry Analyst in the Verdantix Smart Buildings practice. His current research agenda focuses on emerging solutions for building energy management, alongside strategies for building decarbonization. Prior to joining Verdantix, Harry worked as a mechanical engineer at Arup, where he specialized in the design of net zero facilities across the commercial, science and technology sectors. He holds an MEng in Mechanical Engineering from the University of Nottingham.

Rodolphe d’Arjuzon

MD and Global Head of Research
Rodolphe co-founded Verdantix in 2008 and directs the firm’s research strategy across all practice areas. Rodolphe has over 20 years of experience in technology research and strategy consulting. He previously worked for Barclays Bank and L.E.K. Consulting. Rodolphe holds a PhD in Physics from the University of Cambridge.

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