Driven by large-scale mergers and acquisitions, European multifamily investment volumes across the 12 countries analysed reached approximately €92.3 bn in 2021, a 79% increase year on year (yoy) and a 120% 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% of the total.
The share of multifamily investment was as high as 54% of the total in Denmark, 46% in Germany, 39% in Ireland, 35% in Sweden and 32% 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) yoy in 2021 to reach a record low of 3.05%. Prime net multifamily yields are 3% or lower in the top six German cities (2.2%), Amsterdam, Paris (2.8%), Copenhagen and Madrid (3.0%). Prime net yields in Eastern Europe are above 4%.
Marcus Roberts, Savills operational capital markets head of Europe, said: '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 European research at Savills, added: '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.
