The Urban Institute and PwC have just published their 2022 Global Emerging Trends in Real Estate report and it makes for an interesting read.

The report is based on interviews with nearly 30 experts and investors in the real estate industry, and identifies three issues that are currently at the top of people’s minds and could have a big impact on the sector. The Urban Institute and PwC identified uncertainty over the economy due to the Russian invasion of Ukraine, the impact of rising inflation, and the acceleration of climate change as the biggest issues causing concerns.

Even so, the tone is optimistic overall. For all of the global unrest, real estate industry leaders believe that the sector remains an attractive one for investors, noting that real estate has traditionally always been one of the best hedges against rising inflation. What follows are a few highlights from the report, showing why these issues are causing so much concern.

Inflationary pressure: In January, inflation in Europe reached 5.1% and in the U.S. 7.5%, which is the fastest annual rise in 40 years. “The full impact on real estate of labor shortages, rising wages, and food bills and surging energy costs remains unclear,” the report noted. Russia’s invasion of Ukraine also has heightened fears over supply chains, energy prices, and the risk of even higher inflation.

Worldwide uncertainty from Russia’s invasion of Ukraine: As concerns increase about an escalation of the conflict in Europe, widespread uncertainty has been felt across global markets. “The Ukraine crisis has rapidly emerged as a fresh risk to global economic growth,” the report said. A consensus among economists is that the Russian invasion of Ukraine is expected to be a far greater geopolitical risk than slower global growth and higher and longer-lasting inflation.

Exacerbating climate change: Real estate leaders sounded greater urgency around environmental, social, and governance issues. “Climate change is clearly far more front and center on a global agenda than it had been and it’s becoming actionable. That’s the key,” one U.S.-based investment manager said in the report. Two-thirds of the U.S. office stock is located in cities that already have some form of 2030 net carbon target and a tax or consequence if owners fail to meet it, according to the report.