US-style multi-family residential units are coming to Europe and tenants will never look back, delegates heard at PropertyEU’s European Residential & Student Housing Investment Briefing which was held in London this week.
US-style multi-family residential units are coming to Europe and tenants will never look back, delegates heard at PropertyEU’s European Residential & Student Housing Investment Briefing which was held in London this week.
‘People in Europe are beginning to look to the US for the well-established multi-family model, as in many ways the UK is where the US was 25 years ago,’ said John German, Director of Residential Investments at Invesco Real Estate. ‘We have $6 bn invested in this sector in the US and $2 bn in Asia, and it is now driving our residential strategy in Europe.’
In the last three years Invesco has invested in Germany and the UK and most recently in Spain, building on its track record in the US and Asia, and German believes the time has come for this asset class to be recognised by investors in Europe as well. The UK as the most mature market is the obvious starting point, but in due course the benefits to tenants as well as investors will become obvious in mainland Europe as well, he said.
‘We are at Ground Zero in Europe now, these buildings do not exist, but as the market evolves and more offer is created the demand will develop,’ said German. ‘Since Christmas there have been £3 bn’s worth of build-to-rent announcements in the UK, so things are starting to move.’
For investors, the benefits of this asset class are its long-term return profile, a relative stability of income, its low correlation with commercial real estate, equities and bonds and its usefulness in mixed-use portfolio, as well as its adaptability to new trends and demands.
For tenants US-style multi-family units can open up a new world, German said: ‘They are purpose-built shiny new buildings with wi-fi and ancillary services. It is a far cry from the run-of-the-mill Victorian houses badly split up into small units with leaky taps and draughty windows.’
Service is the key word: ‘The real difference is seeing tenants as customers and treating them as such,’ said German. ‘Having experienced staff onsite and the granularity of service provision is something that will definitely translate from the US.’
Marcus Cieleback, Head of Research at Patrizia Immobilien, pointed out that different operating models will be needed in different European countries, as markets and tenant expectations vary markedly: ‘In the UK market US-style levels of service are needed, but that demand is not present in Germany and elsewhere because people are just not used to it. The residential market moves very slowly and it will take at least 10 years to change.’
US habits will not be imported into Europe lock, stock and barrel but selectively, German admitted: ‘In the US dog-washing stations in apartment blocks are a must, for example, but I doubt they will come to the UK or the rest of Europe anytime soon. But simple essentials like having a building manager who fixes things and actually smiles to tenants will definitely be coming across from the US.’