European purpose-built residential is one of the greatest opportunities for institutional investors, according to Aberdeen Standard Investments (ASI), Europe’s second-largest real estate investment manager.
Institutional allocation to housing is very limited in Europe compared to the US, where it is between 25% and 30% of total investments in the market and there are huge differences between countries.
The Netherlands, Switzerland and Finland have a large invested residential sector, with percentages varying between 45% and 60%, while the UK and Italy are under 10% and other countries like Belgium or Spain are close to zero.
‘It has been clear for some time that demand for quality rental property is outstripping supply in European cities,’ said Pertti Vanhanen, ASI co-head of real estate, at a presentation in London on Wednesday. 'A big part of our strategy is to strengthen our presence in Europe by launching new products and winning more mandates.’
ASI is definitely practising what it preaches, as it is planning to invest a further €2 bn in residential property by 2022.
Its current portfolio includes over 15,000 homes across Continental Europe and the UK with an additional 3,400 units under construction and a combined total value of around €6.6 bn.
Multifamily opportunities
The biggest opportunity is in purpose-built private market rented multifamily accommodation, said Andrew Allen, global head of investment research – real estate.
‘These are long-term investments and ultimately they are all about stability and security of income,’ he said. ‘All European cities are growing rapidly and more supply of the right size and nature is needed.’
Unlike in the office sector, it is very rare to have vacancies in residential, Allen pointed out: ‘It’s a very strong dynamic and there is a real potential for rental growth.’
As young professionals become ever more mobile, they tend to move to Europe’s ‘winning cities’ and as households shrink across the Continent, tenants are looking for smaller and affordable apartments.
ASI’s expansion started earlier this year with the launch of the first pan-European residential property fund ASPER with an initial investment of €355.5 mln from eight investors in the Netherlands, Luxembourg and Switzerland in March.
In October a second close was completed with a further €42.7 mln of commitments from investors in Ireland, South Korea and the Netherlands. The goal is to reach €1.5 bn under management over the medium term.
‘We have a bottom-up approach and we focus on affordability and accessibility, targeting areas with proximity to public transport, good amenities and a sense of community,’ said Marc Pamin, fund manager of ASPER. ‘Our track record and our presence across Europe allows us the local reach needed to invest in this sector and ensure sustainable cashflow.’
One of ASPER’s biggest investments has been the acquisition of 824 privately rented apartments spanning 26 buildings in Helsinki’s Metropolitan Area, close to the city centre and well-connected by public transport and cycle routes. In line with the fund’s focus on demographics, the Finnish capital was chosen because it has one of the strongest rates of population growth in Europe.
