Multifamily housing in Europe attracted a record level of investment last year as €97bn poured into the sector.
In a new report on the market, JLL describes it as multifamily’s “coming of age”. The investment total for 2021 was nearly 50% up on 2020 – at the time itself a record breaking year. Although the figure was boosted by mega deals such as Vonovia’s €23.5 billion takeover of Deutsche Wohnen, JLL says the total confirms “the multifamily market’s resilience against the volatility triggered by the pandemic”.
The long-term fundamentals underpinning residential rental demand were behind the multifamily investment market’s record year according to the report, European Multifamily – A Sector Coming of Age.
More urbanisation, changes to household formations, affordability challenges, persistent supply-demand imbalances, and strong city demographics have precipitated structural changes in how the continent’s largest real estate investors allocate capital according to JLL.
JLL also states that there are signs the growth in multifamily is pushing real estate investors into secondary city locations. But it is also helping to put the sector’s emerging markets, such as the UK, on the investor map.
New investment hotspots emerge as mega-deals dominate the market
Geographically, a number of different markets saw record levels of investment into multifamily. Germany’s total was €48bn, the Denmark received €7bn and Sweden, €11bn. The UK and French totals were 46% and 73% above their respective 5-year averages. Spain, Ireland and Finland were also close to their strongest years ever.
“Strong investor demand and limited buying opportunity creates a dynamic market in which investors are continually evolving their strategies to identify new geographies and products,” said JLL’s head of multifamily investment EMEA Gemma Kendall. She said that new markets like the UK and Spain have emerged with further growth predicted in 2022 and beyond and opportunities in secondary cities with strong fundamentals are furthering portfolio diversification.
The increased competition for assets as well as the compression of prime yields has also encouraged investors to look beyond high-rise multifamily blocks in city centres in favour of single-family rentals, coliving, and social/affordable housing.