Operational residential investment (which comprises multifamily, student housing, and senior living assets) accounted for 27 percent of global real estate investment in the first three quarters of 2020, up from just 16 percent a decade ago, according to Savills Global Living Report 2020. The research also shows that capital targeted at the sector from funds has risen by 60 percent in the last four years, from $16.4 billion in 2016 to $26.3 billion in 2020 (Preqin).
The sector’s resilience and strong fundamentals hold true in today’s challenging macro environment, with demographic trends and affordability constraints continuing to drive demand for rental accommodation. As such, investment volumes in the first three quarters of this year were down 31 percent; the least dramatic fall alongside logistics (minus 16 percent) compared to offices ( minus 37 percent) and retail ( minus 38 percent) when benchmarked with the same period in 2019.
“Even with wider global uncertainty as a result of Covid-19, the operational residential sector has held up better than some others this year. Investment activity has largely been driven by the consolidation of companies across sub-sectors including multifamily and student housing,” Paul Tostevin, Director, World Research, Savills, commented.
The report shows that cross-border investment into the operational residential sector has also grown, now standing at $46 billion (Q4 2019-Q3 2020) and accounting for 22 percent of total investment into residential. This is up from the 14 percent that cross-border deals accounted for just four years ago in 2016.
“The private rented sector is just emerging in Poland, but paradoxically it has been accelerated by the current situation. On the one hand, this results from stable income streams generated by rental apartments and student housing – even during the pandemic most projects boast high occupancy rates. On the other, the challenge now is investing in traditional asset classes such as shopping centers, hotels, or even offices, with investors more willingly targeting assets previously called alternative. On the supply side, there has been a significant change to the approach among many residential developers who are appreciating the diversification of sales channels provided by institutional investors buying entire buildings – frequently as early as upon issue of a building permit,” Kamil Kowa, Management Board Member, Head of Corporate Finance & Valuation, Savills Poland, said.