European multifamily investment activity is expected to remain strong in Q2 and could surpass €22bn for H1 2020, similar to 2019 levels, the second highest year on record, according to Savills latest research. This is driven by investor confidence in the sector’s fundamentals, including increasing urbanisation, smaller households, unaffordable house prices and rising occupier demand for flexibility and services; factors that are less dependent on the cyclical health of the economy and the recent effects of Covid-19.
“From a pricing perspective, investors still have the same return requirements as they did at the start of the year. Where we are seeing an impact on pricing is therefore less about changing return requirements and more about a softening of underwriting assumptions as companies strategise on the rental levels and occupancy rates in a post-pandemic world of occupational real estate," says Marcus Roberts, Head of Europe, Savills Operational Capital Markets.
“The amount of capital targeting multifamily assets has remained unchanged since the beginning of the year and, if anything, investor intentions indicate that more capital will be allocated to the residential sectors,” continues Roberts.
“Multifamily can no longer be considered an alternative investment. It has become an asset class suitable for core strategies, particularly in markets such as Germany, the Netherlands and the Nordics, where volumes are comparable or even higher than offices. The sector is also maturing rapidly in Spain and Ireland where last year’s volumes were two and five times higher compared to the five-year average, respectively,” adds Eri Mitsostergiou, Director European Research at Savills.
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