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Savills Global Living Report: The Young and Elderly Are Shaping Real Estate Demand

Global student housing investment volumes, in particular, have risen 87% in the last five years, says Savills. The maturity of the UK and US markets, coupled with low provision yet high demand for purpose-built student accommodation (PBSA), mean that southern European cities offer the strongest opportunities for new investment in the sector over the coming year. But the global need for multi-family, co-living and retirement housing offers opportunities across all jurisdictions, and are particularly under-invested asset classes in the UK, says Savills.

In its Global Living report, the international real estate advisor says that the provision of PBSA is highest in the UK where 27% of all students can be accommodated, and lowest in southern Europe. In Italy, Europe’s fourth-largest student market, the national provision rate is less than 5%. Analysing city-by-city data from StudentMarketing – an independent provider of student housing and micro-living research and data – Savills has identified that provision is lowest in Rome, with a student population of 220,500, but only 6,500 student beds (a provision rate of 3%), followed by Porto (3.5%), Florence (3.8%), Barcelona (4.9%) and Madrid (5.7%). These cities, therefore, offer the best immediate opportunities for investors, says Savills, as many have strong international student populations – indicating a solid supply base – and high average PBSA rents.

Here are some other key takeaways from the report:

 

  • By 2030, 20-39 year-olds will comprise 23% of the developed world’s population. Those aged over 65 will have risen to 23%. Understanding the demands of these groups matters as they become major real estate occupiers.
  • Youthful cities with strong underlying demographic prospects for purpose-built rental accommodation include Edinburgh, Amsterdam, and Copenhagen. Spanish and German cities are aging fast and may offer the potential for new forms of senior housing – but demand exists across the continent.
  • Globally mobile students continue to drive demand for purpose-built student accommodation (PBSA), and mainland Europe is attracting more of them. However, PBSA provision remains very low, just 3% in Rome and Porto, and 4% in Florence, Lisbon, and Seville.
  • Investment in residential alternatives of all types is rising. Big-ticket global residential investment volumes exceeded all global retail or industrial investment in the last year. Global student housing investment volumes have risen 87% in the last five years.
  • Multifamily investment across eight major European markets exceeded €27bn last year, up 19% since 2013. Germany accounted for 54% of investment across these countries. Yields average 3.4%, ranging from 2.1% in Germany to 4.3% in the UK.
  • Global investors are seeking scale, driving management efficiencies. Student housing has a higher cross-border investment share (46%), but the largest single residential deal last year was cross-border, Blackstone’s $10.3bn investment in Spain.
  • The rapid expansion of residential alternatives sectors in the US has been helped by the relative homogeneity of its regulatory environment. Investors in Europe have a much more diverse set of national regulations to navigate.

Read the Savills 2018 Global Living Report in full here.

 

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