An estimated €64bn (£53bn) of capital has been earmarked for deployment into Europe’s build-to-rent, affordable housing, student property and seniors housing sectors over the next five years.
The research by Knight Frank for its annual European Living Sectors Investor Survey recorded the views of 55 leading investors who jointly have over €98bn (£81.5bn) in living assets under management.
The survey found that all 55 respondents plan to increase their exposure to the living sectors, with 41% planning increases of between 40% and 100% of current allocations.
Single family housing emerged within this year’s report as a major growth area, with 54% of investors planning to have exposure to the sector by 2029 – up from 31% at present.
Meanwhile, purpose-built student accommodation ranked as the most appealing investment prospect over the next five years, followed by multifamily housing.
Environmental, social and governance considerations continue to drive investment decisions, with 69% of respondents citing investors as “important” or “very important” in dictating their ESG approach – higher than both regulatory change at 65% and tenant demands at 52%.
The survey highlighted several key challenges for the sector – potential new regulation was identified as the biggest short-term operational challenge by 62% of respondents, followed closely by affordability concerns. These issues come amid sharp rises in rents across many European cities and growing pressure for rent controls.
Knight Frank’s research indicates a marked improvement in debt market sentiment, with 60% of respondents expecting their requirements for debt to increase in the coming 12 months, marking a significant jump from 20% who reported having debt requirements in last year’s survey.
Stuart Osborn, head of European living sectors transactions at Knight Frank, said: “The living sectors continue to demonstrate their appeal to institutional investors, with significant capital waiting to be deployed.
“As we continue to see further European Central Bank rate cuts, we expect activity to pick up significantly in the coming months. While challenges around regulation and affordability remain, the strong fundamentals underpinning occupational markets continue to attract investment.”
Katie O’Neill, associate in the global living sectors research team, said: “There is a real desire to inject and reinvigorate competitiveness into the European economy and living sectors will play a significant role in shifting the dial across the continent. London, Madrid and Berlin are top locations for investors, while Dublin, Milan, Amsterdam and Barcelona also feature in the wish list.
“As well as investment into urban centres, the shift towards new sub-sectors, like single family housing, demonstrates that investors are looking to expand and diversify into markets with the largest misalignments between supply and demand.”
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