Knight Frank said €64bn of new capital had been earmarked for deployment into the purpose-built student accommodation (PBSA), Build to Rent, affordable housing and seniors housing sectors over the next five years.
The findings were revealed within the firm’s annual European Living Sectors Investor Survey, which captures the views of 55 leading investors who together have over €98bn 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.
PBSA ranked as the most appealing investment prospect over the next five years, followed by multifamily housing.
Environmental, Social and Governance (ESG) 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 (65%) and tenant demands (52%).
“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.”
Stuart Osborn, Head of European Living Sectors Transactions, Knight Frank
The surveyed 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.
“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.”
Katie O’Neill, Associate in the Global Living Sectors research team, Knight Frank
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.
“The shift in debt market sentiment is a positive indicator for the recovery of investment activity in the living sectors. As financing costs become more accretive, we expect to see a pickup in transactional volumes in the next 12 months as investors look to deploy the substantial capital they have earmarked for the sector.”
Lisa Attenborough, Head of Debt Advisory, Knight Frank Capital Advisory
