Investment in multifamily assets rise by over 40% across Europe

Residential real estate is the 'biggest growth opportunity for institutional capital in Europe', according to JLL's third annual European multifamily investment report. Investment into the sector reached €56 bn in 2018.

Demographic and economic drivers continue to attract investor interest into the living asset classes including multifamily, the largest sector within living. This includes a new wave of purpose-built multifamily developments that cater to the changing tastes of renters.

Report author Philip Wedge-Bernal, EMEA Living Research Associate, said: 'The European multifamily sector has far exceeded expectations over the last year, with increasing North American interest cementing the continent’s position as a leading hub for global residential investment.

'The pace at which some markets are growing is very exciting, spurred by investor recognition of multifamily as highly credible defensive asset class that provides diversification as part of a wider real estate portfolio.'

The UK and Spain have significantly strengthened their position alongside the perennial strength of Germany, France and the Netherlands as some of the largest markets for residential investment, according to the report. In Ireland, severe undersupply of new homes provides investors with a strong motive to gain exposure to that market in anticipation of rental growth.

The report also reveals that joint ventures (JVs), large portfolio acquisitions and M&A activity will be preferred routes to deploy capital for investors entering new markets. In the UK, single asset deals and JVs with local developers are the most common market entry points, whereas in Germany, multi-location portfolio acquisitions have driven the most growth - totalling more than €2 bn and representing 60% of the total foreign investment in the country’s multifamily sector.

'Portfolio and platform activity have driven total investment volumes over the past two years, with average deal sizes growing across most European markets. Portfolios are often comprised of assets in major urban hubs and this report highlights that investor interest will remain focused on Europe’s largest population centres,' Wedge-Bernal added.

Cross-border investment growth
The proportion of foreign investment has remained stable, while the absolute level of cross-border activity has grown by over 40% to nearly €19 bn in the past year.

Most of the cross-border investment into European multifamily originates from other European countries (51.5%). However, there has been a significant increase in activity from North American investors and global funds over the past year, the report showed. North American investment activity has sky-rocketed by 162% in the last twelve months alone, becoming the second largest source of capital for multifamily outside of Europe.

'Long-term shifts in demography, such as shrinking household sizes and longer, healthier lives are combining with continued urbanisation to create a chronic undersupply of appropriate homes across European cities,' said Adam Challis, head of EMEA living research & strategy, continued.

'Combined with big changes in technology, and a deeper focus on wellness and sustainability, JLL expects the most progressive investors to outperform the market by understanding these new customer demands. Incumbents will be joined by disruptors that are using digital solutions to recast the customer experience. It is an exciting time for Europeans that want to reimagine the way they want to live in cities,' Challis concluded.

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