Multi-family investment tops new high of €40bn

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Multi-family investment reached a new high of €40bn across eight European markets tracked by Savills last year, the highest ever recorded and up almost 27% on 2017, according to research published this month.

Germany accounted for the lion’s share with €15.1bn of turnover, the third highest volume in the last ten years. What historically has been considered an alternative sector to commercial real estate now accounts on average for 17% of the total investment, up from a five year average of 13%, according to Eri Mitsostergiou, director of Savills European research.

‘The markets with the highest annual changes were France, which grew from less than €200m in 2017 to almost €3.2bn in 2018, Ireland where investment volumes increased tenfold to €1.1bn and Spain where the turnover jumped from less than one million to over €3bn last year,’ he said.

In half of the markets - Denmark, Sweden, the Netherlands and Spain - the volume of multifamily investment was higher than offices, making it the preferred property investment segment for the first time on record.

‘A lot of investors don’t know what to buy or what to invest in and multifamily is very stable,’ André Schmöller, CEO of Domicil Real Estate, told REFIRE. ‘I think we’ll see further growth in the sector over the next two-to-four years. This year, we’d like to invest between €200m and €400m in multifamily assets in B and C cities in Germany, such as Hannover or Bremen.’

In September last year, the Danish pension fund PFA invested more than €1bn in buying the Century residential portfolio from Industria Wohnen, consisting of 3,700 homes across Germany – a portfolio that is now managed by Domicil Real Estate.

Domicil Real Estate, for its part is targeting the mid-segment of the multifamily sector. ‘It’s what we call the VW Golf size,’ Schmöller said. ‘We don’t like to go below €8m or above €50m to €80m on our own. It’s becoming harder and harder to invest because more investors are looking, so prices are going to go up.’

Another investor betting big on multifamily is Munich-based developer for residential, office and logistics, GIEAG. ‘We have around €1b (total investment) of projects in the pipeline, including Mayliving in Stuttgart, in which we are investing around €80m,’ Philipp Pferschy, CEO of GIEAG, told REFIRE.

Mayliving will comprise 67 apartments and an office component. In Karlsruhe, GIEAG is in the planning stage for its Kwartier resi and office development. It will comprise three buildings, including two refits as well as 230 resi units. ‘We’ll invest around €150m in it and it should be completed by the end of 2023,’ Pferschy added.

In southern Germany, the main driver of interest in the multifamily space is the low interest rates, according to Pferschy: ‘The other driver is institutional investors looking for opportunities,’ he said. ‘Twenty years ago, multifamily wasn’t at all interesting to most investors. Another driver is the increase in single person households. In Berlin, the proposed rental cap will impact on foreign investment into multifamily assets because of the uncertainty of what will happen with rents.’

The attraction of long-term income streams and the anticipation of future rental growth on the back of rising demand for rental homes and restrained supply have been the main drivers behind the growth of the European multifamily investment sector, according to Marcus Roberts, director, Savills operational capital markets: ‘We expect this trend to continue and we see the share of the multifamily sector rising up to 20% of the total investment activity in most markets in the medium term. This will be supported by the general shift of investors towards income producing assets and sectors whose fundamentals are driven by structural change rather than cyclical factors,’ Roberts added.

Going forward, portfolio sales and rising development activity will bring more product to the market, which in combination with a wider investor base should result in higher turnover levels especially in the markets that come from a lower base, according to Roberts. ‘There is growing potential especially in France, UK, Spain and Ireland,’ he said.