Investment in multifamily assets rise by over 40% across Europe
JLL launches its third annual European Multifamily Investment report, which reveals residential real estate as the biggest growth opportunity for institutional capital in Europe.
London, 29 July 2019 – JLL has launched today its third annual European Multifamily Investment report, which reveals residential real estate as the biggest growth opportunity for institutional capital in Europe. Investment into the sector reached €56 billion 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.
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. 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 EUR 2bn and representing 60% of the total foreign investment in the country’s multifamily sector.
Growth of cross-border investment flows
The proportion of foreign investment has remained stable, while the absolute level of cross-border activity has grown by over 40% to nearly €19bn 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. 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.
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.
“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.”
Adam Challis, Head of EMEA Living Research & Strategy, continued: “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.
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.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.