Butterflies, bears and the future
November 30, 2015
I recently presented at our European Real Estate conference in Madrid. A comment from one of our panellists on the Liquidity vs Fundamentals panel really stood out for me. In response to the assertion that withstanding a geopolitical event the signs are good for the next 12 months, he pointed out that for very few people in the room decisions are about the next 12 months, it is what is happening in 5+ years’ time that counts.
It is easy to be distracted trying to call the end of the current cycle (18 – 24 months is my bet) when actually we should be thinking longer term and about whether it will be a significant crash or a gradual downward slope. We have unprecedented amounts of money pumped into the markets through quantitative easing, artificially low interest rates and fresh equity. Oil is cheap and that, together with other geopolitical events, are impacting several of the emerging economies which are predicted to drive global growth. We are in a unique situation acerbated by a truly global capital market where the butterfly effect – the flapping wings of a butterfly in Brazil causing a tornado in Texas – is very real.
Longer term, what market drivers and disruptors should we be focussed on? How different will the next cycle be? We are already witnessing significant changes in the way real estate is being used. On-line purchasing and the shape of logistics and retail, new style campus communities changing the way we live and work and our cities themselves transformed by new transport infrastructure and shape. Get in touch if you would like to discuss the significant work that PwC has done on "Megatrends" and how our industry plays its part.