Developers in flux as COVID-19 confuses the way forward

#globalproperty #developers #pandemic #construction

Software provider Altus has released its annual Altus Group Global Property Development Trends Report, which provides a picture of the property development industry navigating through the disruption from the current global pandemic and the actions developers are taking to build resilience.

Intensifying cost escalation, trade and labour shortages, and occupiers in flux are causing investment risks that have put the shakes into the global property development industry.

According to the report, which is based on a global survey of over 400 property development executives along with in-depth interviews with industry leaders, the pandemic has been a catalyst for change in the development industry by accelerating trends, intensifying challenges and renewing the urgency for digital transformation and technology adoption.

Wait and see

  • 67% of development executives said tenant/occupier expectations and preferences have a major influence on development planning. This is compounded by the role the pandemic is currently playing in the built environment as occupancy use and building design now have the potential to significantly evolve and impact the market
  • 74% said public sector infrastructure investment (such as transit hubs) has a major influence on development planning. While shorter-term pandemic support is a current priority in many regions around the world, this suggests future economic recovery plans stemming from new government investment in public infrastructure will continue to be a major factor in development planning
  • 68% said that the risk of a cycle downturn has a significant impact on their decisions regarding new construction investments, with distressed asset acquisitions (57%) and change in asset/portfolio mix (66%) viewed as more of a risk than an opportunity during a cycle downturn. These factors are all contributing to many development leaders taking a wait-and-see approach.

“It’s evident from the report that the global development sector is facing a complex set of challenges due to market pressures, many of which are exacerbated by the pandemic and its evolving impacts,” said Scott Morey, executive director at Altus Group. “However, the industry is recognising both risks and opportunities and is balancing a cautious approach while embracing digital transformation strategies to build sustainable resiliency that will carry it through this period of uncertainty and well into the recovery stage.”

 

 

In addition, many executive respondents expressed surprise that significant distressed asset opportunities have not yet emerged, despite the heightened level of economic disruption caused by the pandemic. While this could be a signal that the worst is yet to come as signs of a COVID-19 second wave emerge, development executives appear to be continuously evaluating conditions and waiting for more opportunities to arise.

Pandemic intensifies challenges 

  • 73% of development executives said project cost escalation is a significant challenge facing development firms, followed by environmental regulations (70%), government policies and processes (65%), and trade and labour shortages (65%)
  • COVID-19 has amplified existing challenges with increased trade and labour shortages, physical distancing requirements on construction sites impacting productivity, construction site halts in certain regions, and the complexity of government policies and processes.

Digital transformation must be fast-tracked

With so much unknown due to the pandemic, there has been a shift in recognition among development industry leaders that the adoption of technology can help development firms stay agile and navigate what lies ahead. The findings suggest that development executives are broadly acknowledging that digital transformation strategies and tools are the key to building resiliency for the industry in a prolonged and sustained development crisis.

  • 52% of development executives are considering or planning on using digital transformation strategies to mitigate business challenges, and 37% are already doing so
  • 56% are considering or planning to use data analytics to mitigate business challenges, and 28% are already doing so.

The Altus Group Global Property Development Trends Report is based on a global quantitative survey of 404 property development C-level and senior executives in both front and back office positions at property development firms and owner operators and owner investors with property development divisions in North America, Europe, Middle-East, Asia-Pacific and Latin America. The survey research was supplemented by a series of in-depth interviews with senior development executives. All participating firms had a development pipeline equivalent to at least $200m under development at the time of the survey.

 

Source: PlaceTech

 

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