Europe’s private rented sector a possible €7.2 trn opportunity
Europe and the UK will need an additional 3.6 million homes for rent during the next decade according to JLL’s European Living Capital Markets Growth & Opportunity report. This need represents a €1.4 trillion investment opportunity for institutions, the firm said.
The firm’s research reveals that the sector has grown by 14% over the past decaded. This is in contrast to the 5% increase in home ownership and the 1% decline in social housing.
JLL said that urbanisation, immigration and affordability, along with other long-term structural trends, have made the PRS the region’s fastest growing form of tenure and the firm has forecast that 24% of households will be in privately rented accommodation and that the PRS sector will grow to at least 56.6 million homes in the next ten years.
Europe’s five-year average (2019-23) living investment of €79 billion includes €17.3 billion in forward investment. In 2023, this fell to €12.2 billion, just 0.9% of the investment needed to meet the upcoming demand.
Currently, the majority of private rented homes are owned by small private landlords while the 5.3 million institutionally owned homes in the EU and UK together, represent just 10% of the market.
The institutions’ share of private rental housing is slowly growing and in 2023, there were an estimated 200,000 new institution rental homes. This equates to just 30% of the annual demand.
Continued household growth, with the same proportion going to the private rented sector, will see demand for 3.6 million additional homes over the next decade.
However, the firm said that to reach maturity of 40% market share would require 15.9m additional homes or 17.4m including the future 10-year demand, reflecting a €7.2 trillion investment opportunity, at current capital values.
“There is already an obvious shortage of quality rental housing in Europe. With millions more in need of accommodation in key markets, without significant investment this undersupply will worsen,” said JLL living research director, EMEA, Emma Rosser. “Institutions will be essential to unlocking housing at scale. Professional investors today account for a small portion of the living landscape, but this will change as growing markets continue to attract capital for new purpose-built products.”
