Global investors’ appetite for Living assets growing

The latest JLL survey reveals an optimistic year ahead for real estate investment in Europe, with Living predicted to achieve 30% growth this year. This upward trend has been seen in Poland as well

August 12, 2019

More and more money is being put into the residential sector in Europe. In 2018, sector achieved total investment volumes of €69 billion. Investors’ most popular choice was the UK, and 16% of the invested capital went to CEE markets.

According to the latest JLL European Living Survey, commissioned by JLL and conducted by Aberdeen Standard Investments [1], Living asset class – which brings together multifamily (PRS), student housing, coliving and healthcare real estate assets, are considered an option by 8 in 10 investors who want to expand into new European markets. 41% of existing investors want to increase their exposure in Living, while 45% of those that are not already invested in Living are seeking new opportunities. This could inject as much as €40 billion of new capital into the sector, which last year reached €69 billion. One of the factors making Living attractive is the prospective stable and long-term return.

“The factor that firms contemplating expansion into new classes of assets consider first and foremost is the level of demand, and this, with demographics rapidly changing at the same time, continues to exceed supply in most European countries. This is providing a stable income stream,” says Maximilian Mendel, Head of Residential Investment at JLL Poland.

Demographics driving change

Urbanisation, an aging population, and increasing student numbers are generating demand in the region for a new kind of investment product, which is Living assets. Ongoing social and demographic change is impacting investment allocations. In the past, the most popular sector within Living was multifamily. More than three quarters of respondents said they hold assets of this type, and one quarter say this is almost their sole focus (more than 90% of exposure). The second most popular segment is student housing, in which more than half of respondents had investments. At the same time, 75% of them expect investment volumes for coliving to increase at the fastest rate in the coming years.

Maximilian Mendel says that in Poland as well, these factors are playing an ever greater role in shaping the residential market. “The changes on the labour market and a shift in preference on the part of young people from ownership to broad flexibility of choice (work, location, and rental standard) are one of the main factors that have led to greater interest in rental. The life of young Poles is different to that of their parents – they do not want to be committed to one place or budget for long-term credit. They start a family much later or opt to live in open relationships, and this fundamentally changes their residential requirements.  An increasingly nomadic lifestyle and the growing popularity of sharing economy solutions leads them to seek these solutions in residential as well.”

New areas of growth

Based on current and intended investment, the UK is the most appealing market for Living, with 68% of investors either already invested or targeting the country as a growth market. At the same time, student housing is the dominant segment. The second most popular location for investment to date has been Germany. There, on the other hand, the principal investment is in multifamily. France, the Netherlands, and Sweden can expect the greatest increase in investor developments in the coming years, followed closely by Spain and Ireland, according to the results of the JLL European Living Survey. CEE markets, where 16% of invested capital in the residential sector in Europe is currently located, are considered by 18% of respondents as a new investment target.

“This indicates increasing interest in a region in which this market segment was non-existent only five years ago. One of the reasons for this still conservative approach to developments in this part of Europe is a lack of ready products of a particular size. If we had stabilised portfolios of a suitable scale in Poland and other CEE countries, we would also attract investors whose investment strategy does not include transactions such as forward purchase or forward funding”, Maximilian Mendel, Head of Residential Investment at JLL, adds.

[1] The European Living Survey is based on a survey of 50 investors representing over €3.2 trillion in assets under management (AUM). It encompasses a varied group, both in terms of scale and type of investor. However, they share a common interest in European Living opportunities, with 78% already invested in the sector.