In the crisis year of 2020, personal incomes were falling, but the multifamily sector in Europe, on the other hand, was the most resilient among real estate segments. Investment in these assets grew 6 percent year-over-year and 17 percent on average over the past five years. Why this happened, how can events develop further, and what points of growth and, accordingly, promising investments do experts see?
Where professional investors are putting their money
In 2020, the volume of investments in European commercial and residential real estate decreased markedly. According to a report by Savills, it was about €257 billion, 18% less than in 2019 and 8.5% less than the average of the past five years. At the same time, the multi-family sector was the second most active, with €46 billion invested in it, and some capital flowed into it from the more traditional segments that professional investors usually choose (offices and retail space).
The reasons are clear. The pandemic led to a slowdown in business activity, people are less outside the home and have increased attention to their homes. Investors have already responded to this change. For example, the share of investments in offices fell from 39% in 2019 to 34% in 2020. At the same time, there has been growth in the logistics (from 12% to 15%) and income houses (from 14% to 18%) sectors.
This was the situation in countries with an established market for apartment buildings: their share reached 53% of the total investment in Denmark, 39% in the Netherlands, 28% in Sweden and 18% in Finland. In smaller markets, where the sector is growing rapidly, investor interest in apartments reached exceptionally high values. In the Czech Republic, for example, a large portfolio deal brought the volume of money invested in multifamily homes to 50% of the total investment flow, in Ireland the figure rose to 39% and in Spain to 29%.
In absolute numbers, Germany remains the largest market. In 2020, it accounted for 40% of capital invested in multifamily housing. It is followed by the Netherlands, Sweden, Denmark, the UK and Spain. In 2020, markets such as the UK, France and Denmark saw a marked increase in activity.