Investors piled a record €359bn into European property last year, targeting homes and warehouses as they pulled back from offices and shops which have been hit hard during pandemic.
Hunting stable yields and reliable income, institutional investors, family offices and sovereign wealth funds have shifted focus to large-scale rental housing, known as multifamily or build-to-rent developments, according to property company CBRE.
The €102.6bn invested into multifamily housing in 2021 was 42 per cent more than the total invested into the sector in 2020.
Multifamily is now vying with offices to be Europe’s largest property asset class. Investors spent €111bn on offices last year, but with uncertainty hanging over the future of work, that figure was 20 per cent below 2019 levels.
Where investors have been willing spend on workplaces, they have tended to be high-specification buildings with strong environmental credentials, which they anticipate will remain in demand even as working habits shift.
“In Europe, the evolution of multifamily — which has always been the largest asset class for institutional investors in the US — has surprised everyone on the upside,” said Chris Brett, head of capital markets in Europe, the Middle East and Africa for CBRE.
“The demand for residential is everywhere, there is a general lack of supply in pretty much any city you look at. There looks like there’s going to be growth,” said Brett.
Two major deals accounted for almost a third of the total spend in the sector last year. In September, Heimstaden Bostad paid €9.1bn for a portfolio of properties owned by Swedish rival Akelius and in October, German real estate company Vonovia acquired rival Deutsche Wohnen for roughly €20bn.
Residents in Berlin backed a campaign to expropriate properties owned by large landlords, which they say are pushing up rents, and in Spain, where Blackstone is now the biggest landlord, the government has pushed for rent controls amid concerns over rising costs.
“What’s becoming more important in Europe is what happens with rent regulation. We’ve seen that affect trade and ideally we wouldn’t see too much [regulation],” said Brett. Despite pushback, he added, “with the depth of demand from the occupier and the depth of capital we will see [investment] grow”.
The appetite for warehouses was also high, driven by booming demand for ecommerce. Investment in the logistics sector increased 48 per cent year on year to €62bn in 2021, boosted by major transactions including Blackstone’s £1.7bn acquisition of supermarket chain Asda’s warehouses.
Investors continued their retreat from the beleaguered retail sector, with investment volumes down 11 per cent on 2020, at €35.2bn.
Beneath the record spend, there are clear signs of investors shuffling their property decks and looking to what were once niche sectors such as student housing, cold storage and data centres, said Brett.
“The real estate world we were all used to — offices, retail and logistics — is a very different playing field today . . . investors want exposure to a much broader range of sectors,” he said.