We execute bespoke real estate investment solutions for some of the largest and most sophisticated investors in the world.
Brice Hoffer – Head of Real Estate Research & Strategy – DACH
The rented residential sector has been a magnet for global institutional capital for years, first as a sound diversification play for commercial real estate investors but increasingly as a source of stable income that can ride out the ups and downs of the economic cycle. If anything, the pandemic has reinforced the long-term trend of investors looking for resilient income from residential – in all its forms – that is seen to benefit from strong demographic drivers. With real estate investment now being played out against a backdrop of geopolitical uncertainty and above-average inflation, the residential sector is still proving its worth. But as residential is usually more asset management intensive than commercial property, regulatory aspects have to be accounted for and investors must adapt their strategies between mature and frontier markets.
More institutional capital started flowing into this asset class way before the pandemic. If you look at global property transaction volumes by sector, 10 years back rental residential accounted for about 12 percent of total volume and now it is at least one out of five transactions. This growth is mostly supported by very long-term structural and demographic trends. Despite discussions about an aging society, most developed economies continue to grow resulting in more inhabitants. Another important factor in demand – both for rental and owner – occupied-housing – is that the average size of households is decreasing.
Even if the population is stagnating or not growing as much as it used to do – in Germany, for instance – the overall trend of decreasing household sizes is creating more demand for residential. It is true, however, that institutional investment in residential, as well as industrial, has really increased as a result of the uncertainty created by the pandemic. During the pandemic, it was not such a concern to collect your rent from the residential and industrial sectors. Also, if you would acquire an industrial property, especially logistics – or in the case of residential, multifamily assets – there was no question about convincing investors that it would perform even in this troubled time. This pandemic boost has been a bit of a reactive play, but it is ongoing now because there is still uncertainty in the market.
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