Perhaps unsurprisingly, geopolitical risks dominate concerns for 2025. The threat of global conflicts are cited as the top near-term challenge in the latest Global Risks Report, while geoeconomic confrontation - including tariffs - rank third. This comes amidst rising trade tensions; potential tariffs implemented by the new US administration is an indication that protectionism is a trend to stay.

Trade tensions in recent years have already led to diversification of global supply chains, with ‘China plus one’ strategies boosting markets such as Vietnam, while nearshoring trends saw Mexico overtake China to become the largest exporter to the US. But the prospect of tariffs may further alter global trade dynamics, which, when it comes to real estate is likely to mean greater requirements for warehousing space as supply chains further fragment.

This year’s Global Risks Perception Survey also shows a rising sense of urgency when it comes to the environment. Extreme weather events are the second highest ranked challenge in 2025, and are anticipated to become even more pressing, achieving the top ranking in the longer term, 10-year risk outlook, followed by biodiversity loss and ecosystem collapse.

The recent wildfires tragically affecting Los Angeles are only the latest example of the impact extreme weather has on our urban areas. Authorities in at-risk areas must be alert to the threat, exacerbated by climate change, and invest more heavily in preparedness. Real estate plays a key role here. After devastating wildfires in Australia in 2019 and 2020, for example, the country’s National Construction Code was updated to stipulate fireproof building materials, design and construction, and insists on a minimum distance between vegetation and buildings in high risk areas.

Technological risks are predicted to rise over the next decade too, due to the growth of AI. While uncertainty prevails, the technology has much transformative potential. As businesses adopt AI they may unlock efficiencies and boost productivity (combatting another risk identified: rapidly ageing global populations and shrinking workforces). More directly, the global data centre sector will continue to boom as it expands to meet the world’s rapidly growing data processing needs.

Positively, one set of risks have receded: economic factors. The global economy has proved to be more resilient than predicted, and global trade is still growing. ‘Inflation’, ‘economic downturn’, and ‘talent shortages’ have all fallen in their significance as short term risks in the latest WEF report, compared to last year, and we know from our own survey that an improved economic backdrop is the foundation for real estate market recovery in 2025.

While the world faces many challenges, in common with the meeting’s theme, collaboration will be key to navigating them. Davos 2025 highlights the need for global cooperation to tackle geopolitical, environmental, and technological challenges. For real estate, this means prioritising resilience and innovation, and here too collaboration between stakeholders will be essential.

Further information

Contact Paul Tostevin

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