Secular demand drives increased activity

Global Real Estate Perspective, November 2021

Secular demand has continued to spur investment activity across the Living spectrum globally. With structural factors continuing to drive portfolio reallocation from investors, the Living sector is one of the main beneficiaries. Operational performance remains robust, and capital market activity is buoyant. Total investment volumes in Living reached US$92 billion in Q3 globally, with quarter-on-quarter growth in the Americas (+33%) and EMEA (+23%) and a drop in Asia Pacific (-18%).

Multifamily maintained its status as the most liquid asset type in the U.S. in the third quarter, while complementary segments such as single-family residential attracted increased attention. In Europe, investor interest in multifamily, along with single-family and affordable housing, continues unabated. Confidence in the student housing investment market is slowly improving. In Asia Pacific, Japan remained the most active market for multifamily in Q3, while the build-to-rent (BTR) market in Australia is gaining momentum. There are still very few projects operational in Australia, but the number planned and under construction continues to grow.

Future trends: Investors to move up the risk curve to source assets
  • Outlook for 2022: As the world continues to recover from the drawn-out impacts of the pandemic, the Living sectors will continue to attract significant investor attention. Multiple demand-side factors, such as the return to city centers, international student mobility, and desire to move into care homes will be watched closely as life begins to return to normal. The impacts will vary across markets, but investment dealmaking will likely push yields to record lows as investors seek assets with robust operational and cash flow credentials.
  • Long-term: Cyclical shifts up the risk curve combined with a shortage of assets will provide a tailwind to forward-funding and forward purchase deals, as well as corporate consolidation and joint ventures that emphasize access to development pipelines. ESG will disproportionately feature in Europe and North America as stronger environmental credentials and innovation around better living environments are already an important differentiator for student and multifamily occupiers.