With the gloomy news headlines seemingly mounting by the day, it is difficult for the real estate industry to be cheerful in the midst of a financial crisis that is rapidly becoming a full-blown global recession. But I think the profound structural changes that have been initiated in the listed industry in recent years will be extremely positive for the sector as we emerge from the downturn, as well as mitigating some of its baleful effects in current markets.

As real estate developers and investors tinker with the real estate value equation amidst a storm of uncertainty, despair and opportunity, many property professionals are questioning sustainability’s place at the table. Sustainability, broadly defined, is an integral part of the real estate business and always has been — whether or not that is what it has been called. Sustainability’s definition has grown holistically to encompass a broad range of topics including intelligent design, energy efficiency, water conservation, urban regeneration as well as socio-political considerations.

Having benefited from a virtuous cycle driven by cheap debt, commercial real estate in Europe is now caught up in a vicious cycle of value destruction, along with virtually every other asset class, thanks to the global credit crunch. The “Commercial Real Estate Reacts to Changes in the Capital Markets and Real Economy” chart below details the various facets of the two distinct market types, the virtuous cycle and the vicious cycle. Securitised real estate — both debt and equity — has already gone through several rounds of violent and volatile repricing. Private equity real estate is also experiencing this repricing, albeit through a more drawn-out process.