Report
Capital Flows into European Multifamily Housing
October 22, 2021
Europe continues to see dramatic growth in multifamily housing investments. Over the past three years it has outperformed all traditional sectors with 45% cumulative growth. Covid has done little to dampen the appetite for multifamily, with its investment volumes bucking the trend in 2020 increasing by 24%, compared with a 17% fall in total CRE investment. Remarkably, European multifamily investment volumes saw a record Q4 in 2020 with over €23bn funnelled into the sector. This was partly due to a particularly active market in The Netherlands, as many investors brought planned sales forward to avoid a higher transfer tax which was introduced in January 2021.
Investment volume in multifamily housing in Europe
Source: CBRE Research, 2021
Domestic capital remains active, but cross-border investors are drawn to European multifamily housing as it offers attractive fundamentals for growth. Cross-border capital flows for multifamily housing investment has nearly tripled over the past three years, to currently stand at €34.24bn. We expect this trend to continue; nearly one-third (30%) of respondents to the EMEA 2021 Investors Intention Survey, selected residential as their preferred investment sector. Key target cities included London, Berlin, Munich, and Amsterdam.
Total cross-border capital flows into European multifamily housing
Source: CBRE Research, 2021
Total cross-border capital into European Multifamily Housing 2016-2020
Origins of Capital
Around 40% of cross border activity in 2020 originated from other European countries. Still North American investors have increasingly made up a larger share, and in 2020 accounted for 34% of capital inflows, up from 18% in 2017. Around €6bn (18%) of capital originated from the Middle East. Looking on a country by country basis, the U.S. was the top source of cross-border capital for European multifamily housing. Unusually the second highest source of capital was Israel. However, as this reflects the merger of the German portfolios of the Israel funded Ado with the German funded Adler, it is not a typical cross-border.
Cross-border investments in European multifamily housing by region
Source: CBRE Research, 2021
Top 5 sources of cross-border capital into European multifamily
Source: CBRE Research, 2021
Investor Type
In 2020, REITs and listed funds deployed most capital into European multifamily housing. This was largely driven by a consolidation trend in the multifamily market which was illustrated by growing M&A activity. Private equity made up an unusually high share of capital at 27%.
European cross-border multifamily investments by investor type
Source: CBRE Research, 2021
Top cities
The cities that have attracted most cross-border capital are Copenhagen, Berlin and London. There are two types of cities in our top ten: cities with rapidly growing multifamily investment markets such as London, Madrid and Dublin; and cities with a longer established history in multifamily investments such as Berlin, Copenhagen and Stockholm. Increasingly the growing markets are taking a larger share of capital, with Helsinki and Vienna entering the top ten, replacing the established German markets of Hamburg and Munich.
Top ten cities in Europe by cross-border multifamily investment volume in the period 2016-2020
Source: CBRE Research, 2021
Investor preferences
One of the key characteristics of the European multifamily market in recent years is the large (and growing) share of portfolio and platform sales. This trend is most pronounced for cross-border investors, with only 29% of deals in individual assets. This reflects a strategic demand to quickly establish platforms and deploy capital at scale. For example, Heimstaden have been very active. It was involved in the largest Czech Republic residential investment transaction in 2020 ever with the purchase of the Residomo residential portfolio for €1.3bn from Round Hill Capital. It also bought the Niam portfolio in Denmark for €1.5bn (1.6bn). Heimstaden also acquired a portfolio of about 4,000 units in Berlin, worth €830m.
Proportion of portfolio sales versus single assets in total European multifamily investment volume in 2020
Source: CBRE Research, 2021
European multifamily investment volume in 2020 by size bracket
Source: CBRE Research, 2021
Contacts
Jos Tromp
Head of Business Development Continental Europe
Thomas Westerhof
Head of Residential Investments Continental Europe
