EMEA Investment Report - June 2018
Investment volumes across Europe grow significantly as demand for residential rises
JLL predicts volumes to grow but at a slower than previous years
LONDON, 06 June, 2018 — Investment in European residential totalled €43 billion in 2017 as the market continued to experience a growth in demand from a wider range of global investors attracted to the stable income profile, improved diversification and possibility of building a residential platform.
While nearly all markets saw growth in total investment, a number of these markets – most notably Spain, Denmark, Ireland and the Netherlands - reported double digit growth over the past year.
Levels of institutional investment in Europe have increased significantly over the past year as a result of both heightened activity from foreign investors and greater volumes of forward transactions.
Adam Challis, Head of Residential Research at JLL comments:“Investment volumes in Europe grew by 13% in 2017 as demand for the sector continues to grow. This demand comes from both residential specialists looking outside of their domestic markets but also investors looking to improve diversification across their real estate portfolio.”
Spain, Denmark, Ireland and the Netherlands saw impressive growth in total volumes as investment increased by between 40 and 200% in these locations. JLL expects these markets to continue growing during 2017 as investors target the largest cities in these countries.
Foreign investment represented 33% of total volumes, rising from 25% in 2016. While foreign investors have traditionally been most active in acquiring standing stock assets with value-add opportunities, their appetite to move further up the risk curve has led to significant growth in the number of forward deals completed by international investors.
Challis continues:“Forward deals are often the easiest route to market due the shortage of standing stock opportunities, particularly so in markets that do not have a wealth of stabilised assets such as the United Kingdom and Ireland. The overweight of capital against available opportunities is driving greater attention towards joint-venture deals where investors can get access to suitable land and development opportunities.”
Looking ahead, JLL anticipates that investment volumes will grow but at a steadier rate as a lack of available investment grade stock continues to impact activity. This will force investors to look at other ways to deploy capital, increasing both forward investment and cross border activity through joint ventures.
Andrew Frost, Head of EMEA Residential at JLL comments:“Geographical diversification by residential specialists is also expected to increase. Commercial real estate M&A activity is at an all-time high in Europe following a number of high profile acquisitions in 2017. Although commercial sectors represent a greater portion of current activity, early signs in 2018 indicate that this trend is likely to spread to residential. This is likely to be investors’ preferred method of expansion as they are able to drive immediate scale.”