ISA Briefing: Energy back as key in real estate outcomes

We property strategists are accustomed to working with
traditional real estate variables such as net absorption, rental
growth and vacancy rates. But in the early days of the COVID-19
pandemic, there was no choice but to go on a crash course in
previously unfamiliar epidemiological concepts like positivity
rates, R-naught¹ and vaccine effectiveness, as these suddenly
became drivers of short-term real estate conditions. Over the
past year, real estate researchers have likewise had to quickly
scale a learning curve in understanding energy markets. For the
first time ever, we produced charts denominated in once esoteric
units of measurement like therms, MMBTUs and MWhs.


Gas, electricity and oil prices have long been linked to real
estate outcomes—energy crises sparked 1970s inflation and have
shaped real estate demand from Alberta to Texas and Scotland. But
when supply is predictable and prices moderate, as in the years
before the pandemic, those links can become dormant. They have
awoken again in the past year. The recent dramatic but uneven
volatility in energy prices has deeply influenced the economic
and property market outlook—especially in Europe—and we expect it
to continue to do so going forward.





Contributors:


Brian Klinksiek


Global Head of Research and Strategy


Petra Blazkova


Europe Head of Core and Core-plus Research and Strategy


Hina Yamada


Research Analyst European Research and Strategy