Savills’ third annual survey has found that purpose-built student accommodation (PBSA) is leading investor interest in the Operational Real Estate (OpRE) sector.
Respondents collectively have almost €720bn of real estate assets under management (AuM) and now PBSA has overtaken multifamily for the first time as the highest priority target sector.
Last year, Savills, in collaboration with The Class Foundation, predicted that the European PBSA sector could see 70% growth in the next two to five years.
In terms of OpRE sectors, the highest priorities for the investors surveyed are:
- PBSA – 62% (63% last year)
- Multifamily – 57% (84%)
- Single-family – 41% (49%)
- Senior Living – 41% (29%)
- Co-living – 35% (39%)
- Care Homes – 35% (16%)
“As the most mature subsectors in living, we would expect to see European PBSA and multifamily anchor institutional OpRE portfolios – especially in a countercyclical macroeconomic environment.
“Equally interesting is the deepening demand for exposure to nascent asset categories like senior living, co-living and care; reflective of a broadening base of opportunities available to investors in living, but also growing market sophistication.”
Harry de Ferry Foster, Head of the UK – Investment Management Savills
There has also been a rise in investor appetite across the hotel sector, particularly in the budget segment. This follows the recovery of international travel in 2024 and forecasts for further growth through 2025.
“We continue to see robust liquidity across both bank and non-bank channels, driven in part by the continued low level of transaction volumes. With fewer deals in the market, lenders are competing intensely for opportunities, particularly in the OpRE sectors, which remain a top priority for most capital providers.”
Charlie Bottomley, Director – Capital Advisors Debt Advisory, Savills
In terms of geography, the UK and Ireland, followed by Southern Europe (Italy, Spain, Portugal) and Western Europe (France and BeNeLux), are the highest priority markets for investors over the next three years. Year-on-year, the number of investors pursuing a pan-European strategy increased from 10% to 16%.
“Our survey reveals that respondents are looking to invest around €50bn over the next three years into Operational Real Estate (OpRE). The majority (73%) of this capital is targeting the Living sectors, with multifamily (€8.1bn) and PBSA (€7.4bn) expecting to see the greatest inflows of capital.”
Marcus Roberts, Head of Europe -Operational Capital Markets, Savills
Looking at target returns, Core-plus is now the most popular strategy for those active in OpRE (41%, up from 18% last year), followed by value-add (30%, down from 34%) and core (19%, down from 23%). This is a positive indicator for the market and should support a recovery in investment activity through the second half of 2025 and into 2026.
“The vast majority of respondents, almost 90%, agree or strongly agree that demand for ESG-compliant OpRE assets will increase over the next five years, while the biggest barriers to increased ESG adoption are higher construction costs, lack of clear ESG regulations and enforcement and the difficulty in measuring ESG impact. Encouragingly, the majority of our clients are pushing ahead and implementing the ESG targets they have set themselves.”
Richard Valentine-Selsey, Head of European Living Research & Consultancy, Savills
