Investments in the European residential sector are forecasted to surge, reaching an annual potential of €70 to €85 billion over the next five years, according to Tina Reuter, the new head of property advisers Cushman & Wakefield in Germany. Her forecast was detailed in the firm’s "EMEA Living Sector Survey", just published. The survey, engaging institutional investors who collectively manage over €1.4 trillion in real estate globally, paints a picture of burgeoning optimism fueled by demographic shifts, housing shortages, and evolving social trends.
Over half of the surveyed investors currently allocate more than 20% of their portfolios to residential properties, and nearly 80% anticipate increasing their investments in this sector within the next five years. This growing enthusiasm is reflected in the data from 2023, showing that 22% of all property investments in Europe were in the residential sector, a significant rise from just 6% in 2007.
Germany and the United Kingdom are positioned to gain the most from this uptick. Other regions such as Spain, France, Ireland, and the Nordic countries are also seeing heightened interest. Tina Reuter highlights the investors' keen interest in diversifying within the residential sector, predicting growth in niches like social housing, senior housing, and shared housing, especially in Germany.
The current focus of residential investments in Germany centres on rental properties, retirement homes, and student housing. This trend aligns with the interests of institutional investors, as noted by Jan-Bastian Knod, Head of Residential Investment Germany at Cushman & Wakefield. The survey further underscores demographics as the primary driver of demand growth, with nearly 90% of investors citing it as crucial. Sustainability also emerges as a key focus, with almost 80% of respondents considering it a critical portfolio objective, and about 70% willing to pay a premium for properties with robust sustainability features. Additionally, over half of the investors expect capital values to stabilize by the end of the second quarter of this year.
Tom McCabe, Head of EMEA Living Research & Insight at Cushman & Wakefield, expressed satisfaction with the investor optimism, noting, "It confirms that the residential sector is firmly established as a key component of a balanced commercial real estate portfolio and that investor interest in the stability and demographically-driven growth it offers continues to grow."
Cushman & Wakefield reported a global turnover of $9.5 billion in 2023. Their extensive operations in Germany include major cities like Berlin, Frankfurt, and Munich, covering the full spectrum of real estate services from brokerage to project development and integrated facility management.
Given the ongoing difficulties in the office and retail sectors, this substantial anticipated investment in the European residential sector underscores a theme which we've been highlighting in REFIRE for several months now. Investors have been signalling a significant shift towards residential real estate as a cornerstone of sophisticated investment portfolios, driven by demographic changes and a pronounced commitment to sustainability. As the landscape evolves, the sector’s growth not only represents financial opportunities but also a pivotal shift in the social fabric of housing across Europe.
