Every once in a while, you stumble over a report chock full of data that’s not just incredible data, but credible data. A report that helps you see the shape of the future.
In this case, it’s a crystal ball look at the future of European real estate with penetrating observations and data drawn from legitimate data sources.
Megatrends in Real Estate from Savills World Research bases its projections and predictions on solid data from Eurostat and Oxford Economics. Those fundamentals such as demographics and internal migration trends dictate how all of us will live – native-born and expats.
Savills is, of course, the publicly traded real estate services company based in London.
Real estate is a great real-world barometer for what’s coming, because developers – especially residential real estate developers – have everything to lose by misjudging not just the volume of demand, but the shape of demand. So, in real estate, as in all of life, it’s always about numbers. In this case, population trends and income projections. And the future of Europe will be all about the cities.
Drawing on Oxford Economics data, Megatrends predicts the largest population increases are London, Paris, Madrid, Munich, Stockholm and Paris, while Moscow and St. Petersburg will take their places among the five largest cities in Europe.
These demographic trends will shake Europe to its foundations:
• Europe is aging rapidly.
According to Eurostat, there are about 3.5 people working for every retired person in Europe, and this ratio is expected to drop to about 2.5 by 2030.
From the report:
The share of the aging population over 65 is forecast to rise to 23.9 percent from 18.2 percent over the same period. So, both younger and older people will need to work longer, but also in different ways (flexible hours, crowdsourcing, telecommuting), and older people will need more support in terms of social care.
Megatrends in Real Estate predicts a post-Great Recession generation of higher youth unemployment and lower wages due to increasing automation. Yet despite all this, the report draws on EU data to project overall unemployment in the 26 European Union states is forecast to drop to 8 percent in 2025 from 10.6 percent today. Retail sales are projected to grow by 20 percent in that same period!
With more older citizens, real estate will be shaped by a smaller number of households and greater demand for affordable housing.
Europe is one of the most urbanized continents. Today, nearly 73 percent of the European population lives in urban areas, a percentage projected to increase to 82 percent by 2050, according to the report.
As successful cities attract an increasing number of the educated creative class, wealthy executives and entrepreneurs, the cost of prime urban real estate per square meter will continue to rise. That will lead to a shortage of affordable housing, which in turn will push less affluent people farther out from city centers. As a result, Generation Y and Generation Z might shift to satellite cities or to medium-sized cities, looking for more space and better quality of life without giving up urban amenities, according to Megatrends in Real Estate.
• Europe is exceedingly wired, with Internet access and adoption of wireless devices well over 60 percent across the continent.
Technology is going to have a big impact on the way people live, and by extension on the real estate industry, according to the Megatrends report. Information technology and the digital world “reshape the real one and re-define work, mobility, communication, retailing and distribution, as users achieve more by moving less,” the report states. Technological innovation will also impact some cities far more than others.
Cities with a spirit of innovation are likely to attract young talent and become hubs of communication, collaboration and knowledge. The large European capitals of London, Paris, Berlin, Munich, Amsterdam, Vienna are established centres of innovation, while smaller secondary cities also compete for this title. Last year the European Commission awarded Barcelona the title of European Capital of Innovation (iCapital) ahead of Grenoble and Groningen for ‘introducing the use of new technologies to bring the city closer to citizens’.
• The Megatrends report quotes World Green Building Trends data indicating green building is growing across the globe. In Europe about 60 percent of planned commercial developments will comply with green building standards. According to the survey, consumer demand and branding are expected to be the key drivers of green building activity in the future.
Megatrends in Real Estate wraps up with a bulleted summary with key trends and conclusions.
Perhaps the most helpful features of the report are the mini-data visualization infographics throughout the 7-page report, including graphics of cities projected to see the greatest population growth and the most urbanized nations in Europe.
All in all, a lot to digest in a small number of informative pages.