London jumped two places to become the fourth best European city for Build to Rent investment in JLL’s European Multifamily Investment Market report, putting pressure on more established city markets such as Berlin – where renting has long overshadowed home ownership.
Other cities on the up include Vienna, with the Austrian capital entering the investment list for the first time at number six. This followed the €1,240m acquisition of Buwog by German residential landlord Vonovia.
In the UK, London isn’t the only Build to Rent growth area, with five of the 20 cities in the JLL rankings table found in England. Manchester took the number 11 spot with investment volumes of more than €700m, followed by Leeds (12th position), Birmingham (16th position) and Brighton (17th position).
Overall investment volumes in European residential also surged to a record high, the research revealed, with investment rising by over 40% to €56 billion in 2018, far exceeding expectations.
Increased cross-border investment, large portfolio deals and greater M&A activity helped to spur total activity to a higher level than ever before, while the emergence of a few smaller markets such as Dublin has also meant that Build to Rent investment in Europe is diversifying, ‘creating new lifestyle choices for more people in more places’.
Earlier this year, Savills said multifamily investment activity reached €40bn in Europe for the first time in 2018, 26.6% higher than 2017. In half of the markets it monitors - Denmark, Sweden, The Netherlands and Spain - the volume of multifamily investment was higher than offices, making it the preferred property investment category for the first time on record.
In the UK, meanwhile, a report recently revealed that investment in the Build to Rent sector hit a record high in 2018, eclipsing £4 billion - up from £2.4 billion in 2017. Knight Frank has previously said that around £75 billion will be committed to Build to Rent in the UK by 2025.
There are currently 142,999 Build to Rent units either completed or planned across the country, with 32,223 completed, 36,410 under construction and a further 74,366 with planning permission. In London, there are a total of 74,580 units, while outside of the capital there are 68,419 units.
The latest research from global real estate firm CBRE shows that the total institutional investment into the UK Build to Rent market was 20% higher in the first half of 2019 than the same period of 2018.
“Residential investment in the UK has had a breakthrough year, at least in the European context,” the report’s author Philip Wedge-Bernal said.
“It is a signal of how far this market has progressed in five short years. This has cemented the UK’s place as a leading European hub for residential investment.”
He added: “Both in the UK and across Europe, multifamily assets offer a significant opportunity for investors to diversify their real estate portfolios. The sector’s historical performance as a defensive investment is likely to attract even greater attention from investors seeking stable cash flow and diversification benefits.
Wedge-Bernal said the outlook for the year ahead remains broadly positive, especially once the current political uncertainty surrounding Brexit begins to clear. “Regulatory changes represent an ongoing risk that could undermine further investment, however,” he continued. “We anticipate that volumes and pricing will remain stable until these issues are resolved.”
Adam Challis, head of living research at JLL, also commented on the report. “Long-term shifts in demography, such as shrinking household sizes and longer, healthier lives are combining with continued urbanisation to create a chronic undersupply of appropriate homes across European cities,” he said.
“Combined with big changes in technology, and a deeper focus on wellness and sustainability, JLL expects the most progressive investors to outperform the market by understanding these new customer demands. Incumbents will be joined by disruptors that are using digital solutions to recast the customer experience. It is an exciting time for Europeans that want to reimagine the way they want to live in cities.”