A panel of leading experts in European residential real estate has found that government regulation and the Covid fall-out are buffeting the sector, but experienced investors can still make a tidy nest egg from the asset class.
Speaking at PropertyEU’s Residential Outlook 2020 Roundtable, the closed-door debate featured heavyweights AXA IM - Real Assets, Bonard, Catella, CBRE Global Investors, Colliers, Patrizia and Trei Real Estate tackling the biggest themes surrounding the asset class.
Panellists included Allen Chilten, managing director capital markets (Patrizia); Xavier Jongen, managing director European Residential (Catella); Gunnar Larsson, director of capital markets, Sweden (Colliers); Paul Oremus, fund manager Dutch residential fund (CBRE Global Investors); Joe Persechino, head of residential and student accommodation (AXA IM – Real Assets); Samuel Vetrak, CEO (Bonard); and Jacek Wesolowski, managing director, Poland (Trei Real Estate).
‘Today’s increased demand for residential from international institutional investors is not just from real estate investors,’ said Chilten. ‘We are seeing bond investors looking at the residential space for its similarities with bond income and the kind of yields they seek. For us, it’s key to have specialists on the ground, and over the last 36 years, Patrizia’s experts have learned a lot – new investors are still navigating the sector’s idiosyncrasies.’
Said Persechino: ‘We don’t think that the urbanisation trend is going to go away – people will still want to live in cities.’ However, the global pandemic has definitely been throwing some interesting curve-balls, raising questions about the necessity of living in prime, downtown locations for work-related reasons, Persechino added. ‘We are also talking a lot about suburbanisation, and if people will look to move further out to larger homes, with a garden or extra bedroom, if they don’t have to be in the office so much.’
Added Jongen: ‘City living in places like London or Paris arose as part of the industrial revolution – it’s where the jobs were. Further employment, services, and high-quality leisure followed. Right now, if you are living in a city like that, the restaurants and theatres are closed, the offices are empty, but you are still paying a lot. Why would you do that if you could live further out?’
Yet Oremus countered: ‘We’ve been talking about people escaping to the country for a long time – well before Covid – but it hasn’t been happening. Most people are moving into cities to enjoy amenities. We think that trend will continue.’ He added: ‘We are also a true believer in sustainability.’
Added Larsson: ‘In Sweden, institutional residential is actual the biggest investment class at the moment. Even in times of crisis, it’s an area that investors flock towards. Build-to-rent (BTR), public use properties with government-backed or semi-government-backed leases - long or short - are the two strongest sectors. We’ve seen almost no price reductions – it’s almost been the other way round.’
‘The long-term urbanisation trends undoubtedly back the case for rented residential,’ said Vetrak. ‘Aspects such as the sharing economy, less buying of objects, people getting married and taking on mortgages a decade later than in the past, support its fundamentals. In addition, student housimg is resilient in a downtown, backing its investment case.'