There are enough data points to suggest that we can look to the future of the retail sector with at least cautious optimism. Looking at the macro headlines first of all, the unemployment rate in Europe has fallen to around 6.0 percent from more than 7.5 percent in 2020, and more than 11.5 percent as recently as 2013. Euro zone GDP expanded by 0.3 percent in the first quarter of the year, its fastest rate since the third quarter of 2022, and inflation in the United Kingdom and Europe has fallen significantly. Furthermore, the first-quarter Global Retail Attractiveness Index of 2024, which is compiled by Union Investment and GfK, showed the highest result for Europe since 2018 on the back of these improving metrics.

Regulatory environments are constantly evolving, necessitating continuous monitoring and adaptation by investors. Additionally, access to accurate and comprehensive data on sustainability metrics is often limited, complicating the assessment of compliance and performance. Investors may also face pressure to prioritise short-term financial returns over long-term sustainability goals, further complicating compliance efforts with sustainability regulations. The core issue lies in reconciling regulatory compliance with genuine sustainability outcomes.

While investors' knowledge and skill have grown tremendously, the resources available to manage their blossoming portfolios have not kept pace. This means investors have had little choice but to reduce their investment manager relationships. In addition, investors have long attempted to better align their interests with their investment managers by insisting those managers have skin in the game. For investment managers to compete in that environment, they have had to broaden their investment programme offerings to meet investors’ ever-expanding property type and geographic market preferences. In response, the majority of investment management firms have continued to grow organically.

I was recently invited to speak on a panel at a conference, entitled Clash of asset classes. One of the takeaways from the discussions at the event was the view — shared by some investors — that real estate and real assets such as infrastructure or renewable energy are seen as distinct asset classes with little in common. From this point of view, it is not difficult to imagine that a clash is imminent. But we are not seeing a clash of asset classes. Instead, what can be seen is a continuum along four major trends that are shaping all asset classes. The four “Ds”: deglobalisation, decarbonisation, digitalisation and demographic change, are the drivers of this long-term dynamic.

The ingredients for a “broader-based” property market recovery are gradually coming together, says MSCI. The data provider has revealed that European commercial real estate investment levelled off in the second quarter of 2024 after seven quarters of annual declines. A rebound in deal activity for the United Kingdom and some smaller markets offset the continued weakness of the German and French markets between April and June 2024, according to MSCI’s latest Europe Capital Trends report.

Office attendance in Europe has surged, as companies continue to find success in attracting employees back to their desks. CBRE’s 2024 European Office Occupier Sentiment Survey, which has questioned more than 120 companies, has found that weekly office utilisation of between 41 percent and 80 percent has risen to 61 percent.

The evolution of smart buildings represents real progress across the real estate industry, with the integration of new technology offering great opportunities to help landlords enhance efficiency and deliver improved experiences for tenants.