EMEA living sector set for investment boom

Investment in the EMEA living sector has the potential to reach €70bn-85bn (£60bn-£73bn) per annum over the next five years. A report from Cushman & Wakefield found more than half of the investors in its EMEA Living Sector Survey have more than 20% of their real estate portfolio allocated to the living sector, with 80% expecting to increase this over the next five years. The report, which surveyed investors managing more than €1.4tn in global commercial real estate assets, said there was strong optimism for growth in the sector, driven by “demographic changes, lack of supply and societal megatrends”. The survey said this optimism was reflected in 2023 investment volumes, with 22% of all real estate investment volumes in Europe coming from the living sector, up from 6% in 2007. Sectors set to benefit Tom McCabe, head of EMEA living research and insight at Cushman & Wakefield, said investment in the living sector is targeted towards private rented and purpose-built student accommodation. However, the survey respondents also said investors are keen to diversify, with segments such as social/affordable housing, senior and co-living all expected to grow and mature over the medium term. Some 26% of the investors surveyed said acquiring stabilised stock was the preferred method.  In the UK, investors have been snapping up stabilised stock for their portfolios. Earlier this year, Goldman Sachs Asset Management and Tene Living bought three BTR assets from Quintain in Wembley Park. Quintain also sold another two assets in its Wembley Park portfolio to private equity giant KKR in the same week.  Of the investors surveyed, 26% said joint ventures were their preferred method of investment, with 24% choosing forward funding, 18% preferring forward commitments and just 6% selecting repositioning. Geographies set to benefit The survey found UK and German markets are set to benefit the most from recovery in living investment volumes, with private rented accommodation in these geographies drawing the focus of investors. Spain, France, Ireland and the Nordics are also attracting interest from the investors surveyed. McCabe said: “It was undoubtedly a challenging year for the living sector in 2023, yet we’re buoyed to see optimism from investors. Our survey confirms the sector is firmly cemented as an essential component of a well-balanced commercial real estate portfolio, and investor appetite for the stability and demographics-driven growth it offers continues to expand. “However, it is capital value stabilisation that is the topic of choice amongst investors, and we were heartened to see investor sentiment broadly in line with our own views. The economic picture will likely remain unsettled. However, just over half of respondents indicated capital values would stabilise by the second quarter of this year, in turn supporting a recovery in capital values.” Image © Hufton+Crow/VIEW/REX/Shutterstock (5776443a)