Return of large deals pushes European living up 59% in Q2

LONDON, 31 July - Investment in European living real estate surged to €13.9bn in Q2, in a pronounced rebound from Q1, which saw the lowest level since 2015.

The total reflected a 59% jump quarter-on-quarter and also a 17% increase on the levels of Q2 last year. However, investment levels are now 20% below the longer-term five year average (2019-2023). 

Living was the largest sector for investment volumes in Q2, accounting for 26.6% of direct investment (excludes entity and land deals). This compares to 24.4% for the offices sector, with industrials and logistics at 17.5%. 

The rise in living transactions follows two quarters of yield stabilisation for multifamily and student housing, with signs of correction in some active markets as the outlook for investment improves and buyers gain confidence. 

In Q2, there was €2.5bn invested in transactions over €500m, compared to nothing in this bracket in Q1. Year-on-year increases have been experienced across all deal size brackets. Just 29% of investment was via portfolios, compared to 55% over the previous five years. 

Purpose-built student accommodation (PBSA) experienced the largest annual increase +94% to €2.7bn, due to a number of large portfolios trading in the UK.

Multihousing investment rose 18% year-on-year to €9.7bn. Healthcare transactions remain depressed, at €1.6bn, amid ongoing repricing in some markets. 

The UK was top investment market at €4.7bn across the sectors, up 35% year-on-year and 20% on the five-year average, supported by PBSA and single family rental activity. Germany followed at €3.1bn, rising 18% year-on-year and more than three times the level of Q1. Historically the largest market for transaction, Germany is still 16% below the five-year average. 

Other multifamily markets in Switzerland and Denmark also all experienced big increases on last year, with Spain driven by a range of sectors, including PBSA and coliving. 

Gemma Kendall, head of multifamily capital markets, EMEA, at JLL said: “The activity pick-up we observed in Q1 has now noticeably translated into stronger numbers for Q2. Yields have predominantly stabilised and investor sentiment continues to improve, based on strong underlying fundamentals.

“We expect momentum to continue throughout the year, as the gap between buyers and sellers is diminishing and confidence is increasing.” 

Emma Rosser, director for research, EMEA, at JLL, said: “The big change this quarter was the return of large deals. The average deal size jumped from €35m in Q1 to €45m, more in line with the long-term trend. 

“Investors have been favouring single assets over portfolios, although recent activity could well see these deals bounce back later this year, further strengthening the increase in total volumes.”