Driven by large-scale mergers and acquisitions, European multifamily investment volumes in the 12 countries analysed reached approximately €92.3 billion in 2021, a 79 percent increase year-on-year and a 120 percent increase on the past five-year average, according to Savills.
Vonovia’s acquisition of Deutsche Wohnen and Heimstaden’s purchase of the Akelius residential portfolio in Germany, Sweden and Denmark together accounted for about 40 percent of the total. The share of multifamily investment was as high as 54 percent of the total in Denmark, 46 percent in Germany, 39 percent in Ireland, 35 percent in Sweden and 32 percent in Finland. In all these markets the sector was larger than offices in terms of investment volumes in 2021.
The average prime multifamily yield in Western Europe compressed by 7 basis points (bps) year-on-year in 2021 to reach a record low of 3.05 percent. Prime net multifamily yields are 3 percent or lower in the top six German cities (2.2 percent), Amsterdam, Paris (2.8 percent), Copenhagen and Madrid (3.0 percent). The prime net yield in Prague is 4 percent.
Marcus Roberts, Savills Operational Capital Markets Head of Europe, says: “Global capital allocations in European real estate, and multifamily, in particular, are rising, due to strong fundamentals and the low-interest-rate environment.”
The challenge for core investors in 2022 will be to identify stabilised assets, while more opportunities will be available for new developments and forward funding agreements. However, labour shortages, rising construction costs and supply chain disruptions will slow down development activity.”
Eri Mitsostergiou, Director of European Research at Savills, adds: “One of the emerging risks of the multifamily sector is the more stringent regulatory environment, which aims to protect households from rising rents. We believe that while these measures limit rental growth prospects, they provide security to tenants, thereby reducing the risk of frequent tenant turnover, and suit core investment strategies.”
According to Savills, multifunctional, mixed-use neighbourhoods have once again emerged as the ideal environment for thriving communities. This can lead to more mixed-use developments, which in addition to residential, include uses that will make them more attractive and resilient by providing, amongst others, affordable housing, convenience retail, flexible offices, health and wellness.
Fraser Watson, Director, Investment Advisory, Savills CZ&SK, says: “Demand for multi-family investment opportunities in the Czech Republic remains strong, with a growing depth of buyers actively seeking exposure to this resilient sector. Domestic and international buyers are chasing a relatively limited number of acquisition opportunities, and we are seeing healthy competition for existing and pipeline projects alike. The recent rises in the Czech base rate have not prompted a reduction in demand from investors, with lending options in EUR still being available and offering a good spread over purchase yields.”
