The current year is expected to be full of economic challenges and uncertainties. After the stagnation of the past year, the market situation could turn for the better or for the worse at any time. As a result, companies’ strategies and priorities must change frequently and quickly. This calls for flexible and timely solutions, during which modern technology can be a great support. The views of experts across the real estate sector and their forecast for this year are summarised by PlanRadar, a company operating a digital platform for efficient process management, communication and documentation in the construction industry. Given its long-standing presence in the market and its work with a diverse range of clients (from investors to general contractors to project managers and architects), its analysis is comprehensive and covers a wide range of perspectives.
“While 2023 brought stagnation across real estate sectors, this year could see a key change. However, companies are waiting and watching the impact of various economic factors on the market,” comments Adam Heres Vostárek, digitalisation expert at PlanRadar, adding: “New geopolitical issues are emerging almost constantly. A preparedness strategy, supported by appropriate technology, can therefore have an absolutely crucial impact on the business stability of companies.”
This year’s main challenges: inflation and geopolitical risks.
The outlook for the European real estate market in 2024 is not clear. It contains predictions of slow growth but also of looming economic challenges. The delayed impact of higher interest rates and conservative lending practices could have a negative impact on both consumer spending and investment – construction not excluded.
“A number of European studies expect construction output to decline due to inflation, rising interest rates and a slowing global economy. These economic challenges are making financing options more difficult, sharply increasing costs and reducing the viability of construction firms. Thus, a return to pre-pandemic levels seems unlikely until at least 2025,” says Adam Heres Vostarek.
With central banks raising interest rates during 2023, much of the industry remained in “maintenance mode”, eagerly awaiting more favourable conditions this year. As a result, everyone is feeling optimistic that global inflation is beginning to ease. However, concerns remain about its future path and its potential impact not only on interest rates but also on liquidity. Higher borrowing costs and limited access to credit in general may make it much more difficult to start new construction projects as well as to continue existing ones.
Market sentiment is also closely related to geopolitical factors. These can have a direct impact on economic growth through their effect on consumer and business confidence, which influences spending and investment decisions. They can also affect commodity prices through disruptions in supply chains. Possible policy changes thus contribute to general uncertainty and restraint, especially for projects requiring large-scale investment.
Europe has to face the problems associated with the lack of affordable housing.
Another challenge is the severe shortage of new housing, reduced construction activity and the decline in residential projects in the pipeline. The urban population is growing and, although household sizes are gradually shrinking compared to previous years, demand for new housing is steadily increasing. Despite promising prospects for this year, supply has no chance of matching demand. Companies are struggling with insufficient financing, lengthy planning processes and uncertainty about the value of properties once they are completed. All this continues to exacerbate housing affordability.
Sustainability as a challenge and an opportunity in one.
Environmental protection is also an increasingly pressing issue. Professionals across the real estate sector are gradually introducing various environmental measures, motivated by international regulations such as those from the EU, as well as local regulations and innovative approaches by individual companies. All this represents the beginning of a new era in the construction industry with an emphasis on ESG.
“It is true that new regulations can come with obstacles. On the other hand, buildings with environmental certification offer a competitive advantage in the market, as they ensure higher demand from companies committed to ESG targets. And the number is growing,” says Adam Heres Vostárek, adding, “This is matched by investments in digital solutions with regard to sustainability and renewable energy. These have increased significantly in the last three years. Our recent survey on the state of digitalisation in the construction industry showed that 66% of respondents have invested in this area.”
The impact of modern technologies on ensuring stability.
Economic uncertainty is affecting the profitability of companies. The use of new technologies can give them the support they need and offer innovative solutions. Companies need to be financially resilient to withstand various setbacks, but they should also be ready to seize the opportunities that arise from these challenges.
PlanRadar’s survey confirmed that many companies have already seen this potential, with 97% of experts expecting an increase in investment in digital over the next three years. “The main challenge we observe in most countries is the clinging to traditional practices, coupled with scepticism about return on investment (ROI),” explains Adam Heres Vostarek, continuing, “Yet 95% of survey participants who have started using specialist construction software have seen cost savings. A total of 35% of them estimated savings of 10 to 30%. At PlanRadar, we enable our clients to make informed decisions and flexibly adapt their strategies. Using predictive analytics and machine learning, we help minimize risk and allocate resources more efficiently, resulting in better financial results for companies.”
A range of digital tools designed to ease the burden on companies and save time and costs are now available. The construction industry, which contributes significantly to domestic GDP, cannot afford to overlook this. New technologies enable companies to operate more efficiently and contribute to their long-term financial stability. Although it is a challenging year ahead, it brings with it exciting opportunities and hope for growth, which can be fostered through collaboration between industry leaders and pioneers from the world of innovative technologies.
Source: PlanRadar,
