ESCP Summer School interview questions

In collaboration with Europe’s leading business school, ESCP, we have been organizing Summer School program on the real estate market since 2018, with our keynote speaker – Jaime Luque -, professor at ESCP Business School.

In our latest interview, we talked with Jaime about the current trends in the real estate market and our next Summer School that will be held in June, 2022.

 

Is Covid-19 a trend-accelerator and a change-maker in the field of Real Estate?

The Covid-19 pandemic has changed the real estate sector in several ways. First, we have seen that households’ mobility during the pandemic has significantly decreased, impacting the hospitality sector and the demand for hotels. Second, lockdowns have accelerated the digital transformation and remote working, in turn decreasing the demand for office space. Retail real estate has also suffered because more people prefer to buy online than on the street. The winners are the owners of industrial/warehouse space, which has experienced an unprecedented surge in demand. Third, we have seen a rise in households’ defaults on rents, mortgage payments and utility payments, and many governments have implemented measures such as rent control and eviction moratoria, which we know are effective in the short-term but may have negative effects on affordability in the medium- and long-term.

The sharp rise in inflation is here to stay with us. How does inflation impact the market? How will it impact the already crowded housing market?

During the Covid-19 crisis, many central banks and governments have increased their monetary injections into their economics. For example, the Federal Reserve has double its balance sheet from $4.5 trillion to $9 trillion. In addition, the Biden’s administration has announced an injection of $5 trillion. All this together means a massive amount of new money flowing into the economy and as a consequence we expect inflation to skyrocket. We have now seen inflation rates that we haven’t seen for decades and central banks are starting to react to this by announcing increases of interest rates. This may slow the growth rate of inflation by the end of the year.

The impact of inflation on the housing market is visible and quite acute in many countries. From a real estate investor perspective, inflation does not necessarily mean bad news because real estate is a good hedge against inflation. So if inflation growth continues, I expect to see a higher demand for real estate.

What are the key Real Estate trends for 2022?

For 2022 I expect that the office and retail space markets will recover partially as the population goes back to their previous routines, yet I do not expect a full recovery, in part because of the digital transformation that the economy is experiencing, as mentioned before.

I do expect a strong growth rate in new real estate technologies (PropTech) that serve the real estate managing and living sectors. I also expect that United States, China and India will be the countries that attract the highest amounts of investments in PropTech (see the 2021 PropTech Global Trends Barometer for additional insights on these trends).

We will cover some of the above topics during our joint Summer School. Could you please say a few words about course, why it is worth attending?

The ESCP-BIB Summer School in Real Estate is the main academic event in Europe that brings the latest trends and modeling techniques in real estate investments to professionals in the sector. It’s also a great opportunity for networking and exchanging ideas. The program nicely combines academic topics on modelling real estate finance and investments with talks and case studies from first-class real estate professionals. The program is also intereting for undergraduate and graduate students as it allows them to understand the importance of the real estate sector in the economy (between 10% and 30% of the GDP of most developed countries). The Summer School in Real Estate is a must event for anyone that wants to deepend their knowledge and network in real estate in Central and Eastern Europe.