Governments are under pressure to rebalance their budgets after years of major spending and negative interest rates. The process of decreasing the debt burden, compounded by the need to refinance at positive interest rates, is creating a budget line for governments that could soon rival the size of essential public services such as healthcare.

The global economy is undergoing fundamental changes. Turbulent times, not seen since 2008, are accelerating and becoming the new normal, creating a complex equation with various parameters:

Factors such as energy costs, building materials, and wages are having a significant impact on the industry. We begin 2023 with a decrease in the double-digit inflation rates seen in 2022. If this decrease continues, it would be a manageable shock. However, if the inflationary period stretches for years, it will be systemic and difficult to incorporate into financial models. The ongoing Ukraine war and its potential end could also be inflationary, as cheap energy would flood the market again. However, a new growth cycle is a credible scenario as well.

National and local leaders have a busy agenda ahead for investors, businesses, and citizens with:

  • An increase in taxes post-Covid: discussions of wealth taxes are becoming more common, and governments are looking for ways to increase revenue. Efficiency and cost reductions are not as prominent in these debates. The EU is attempting to control some governments by linking subsidies to structural reforms (pensions, job markets, etc.)
  • A push for energy efficiency and sustainability: private sectors are facing the burden of improving real estate, while states are actively discussing the ideal mix in sourcing energy, with major focus on plans around nuclear, gas, and renewable energy. The timing of these investments is critical, as some strategies require years, or even decades, of planning. This is the essence of what should be a pact between the public and private sectors.
  • Price control: the matter of affordability and subsidies are popular topics, but they should be left to the market to settle. Critical mistakes are often made with these policies, resulting in the opposite effect of what was originally intended, and those who were supposed to benefit, end up footing the bill.


Recession or Stagflation:
A recession is inevitable, but luck and central banks’ acumen will be the main drivers to determine the severity. With US mortgage rates at 7% at the end of 2022 and 4% in Europe, homeowners are facing a harsh reality, forcing many to remain renters.

Virtually bankrupt governments cannot afford to build new residential units, leaving the private sector to navigate a challenging environment to deliver units and stay profitable.


Real Estate Segments:

  • RESIDENTIAL: Improving the quality and energy efficiency of housing is important for households and the public sector, but they are not prepared to pay for it, even though energy gains can be substantial and deflationary for households. Factors such as location and charm continue to be key.
  • RETAIL: The retail market is competitive, and it is becoming easier for supply to meet demand on high streets. However, it is more difficult in peripheral areas. Money is being left on the table by retailers who are struggling to find the right balance between brand awareness, the physical retail experience, and online sales.
  • OFFICE: Office buildings need to be cutting-edge to attract wealthy tenants, or they will become sub-par for the rest of the market. Old and energy-inefficient buildings will need to adapt or be converted to residential.
  • WAREHOUSE: The warehouse market experienced a boom that lasted two years, but it is now back to dull and super-competitive conditions.


Energy efficiency across all segments. Retail should be the next segment to see significant changes and new legislation. Rent increases are unavoidable for all residential and high-end offices. Retail and Warehouse will have pressure to be competitive as profitability to be checked and monitored 24/7.