Duff & Phelps, a provider of valuation, governance, risk and transparency solutions, has published its latest commercial real estate report. The research shows that nearly seven in 10 real estate professionals (69%) expect commercial real estate transactional levels to return to their pre-pandemic state by the end of 2022.

The report surveyed opinions from 179 commercial real estate professionals from around the globe to find out how different sub-sectors across the commercial real estate industry are emerging from the pandemic. Close to half of these respondents (46%) are from the UK, and the rest are from Europe (27%), the U.S. (17%) and a range of other countries (10%).

Broadly, the report found that market optimism has increased markedly since 2020. More than three-quarters of respondents say they are either slightly (45%) or much more optimistic (31%) about the future of the real estate sector compared with the onset of the pandemic in March 2020.

The 2020 survey found that nearly four out of 10 respondents (39%) expected property valuations to drop 5-10%, and almost a third (31%) feared an even greater negative impact. In contrast, the 2021 survey found that only 41% of respondents expect the pandemic to have a negative impact on valuations in 2022, with 50% saying that it will have little or no impact on asset values, and 9% suggesting it could have a positive impact.

Despite this optimism, respondents also reported that there are still challenges facing the market. When asked about the biggest risk to the market in the coming year, most respondents identified a slow recovery from COVID-19 (41%) in 2022 as the biggest threat to commercial real estate in their region. This was followed by inflation, which was cited by almost a fifth of respondents (18%) as the biggest threat. Inflation was an even more significant worry for UK respondents, with 26% citing it as the greatest threat.