The Conversation - CHRISTIAN ULBRICH, CEO & PRESIDENT, JLL

HIGH INFLATION AND GEOPOLITICAL CONCERNS HAVE DEALT A DOUBLE BLOW TO THE REAL ESTATE SECTOR GLOBALLY. AS CHINA CONTINUES TO SUFFER UNDER THE WEIGHT OF A COLLAPSING REAL ESTATE MARKET, RAISING ALARM OF A POTENTIAL DOMINO EFFECT ACROSS GEOGRAPHIES, JLL CEO AND PRESIDENT CHRISTIAN ULBRICH WEIGHS IN ON THE RISKS AND THE OPPORTUNITIES, AND WHERE INDIA STANDS.

- RAJEEV DUBEY

PAIN POINTS

What is the current state of real estate globally?

Real estate values are influenced by cost of capital, which is influenced by interest rates 1. What we have seen globally are extremely low interest rates for a very long time, which then spiked up in a very short period. This means values have to adjust to the new interest rate requirement, which takes a bit of time. There is a lot of pain in the system because mathematically, if the interest rate for a 10-year bond in the U.S. moves up to 5% from 1.5%, there is an increase of more than 300%, which has to reflect in real estate values. This has led to a situation where the transactional volume - how much real estate is being transacted from a commercial perspective has dropped more than 50%, and if you go over a two-year period, it's actually 80% on a global basis. That is a crisis in the global real estate market.

World over, very few pockets have been doing better. For instance, in Japan, a little bit of inflation has helped create interest in the market. The economy is not doing badly there. India, on the other hand, is a massive beneficiary because of the tension between China and the U.S.

What do you see as the biggest geopolitical risk in realty?