JLL’s latest EMEA Living Quarterly Bulletin reveals that the living sectors, including multifamily, student housing, coliving, and healthcare have maintained their defensive position as stable operating cash flows continued during the pandemic.
Demand for multifamily, one of the most resilient living sectors, remains at an all-time high. Across the sector, early indications of rent collections levels are positive, with many investors reporting over 95% of income, spread across local markets, the report said.
Record Q1 multifamily investment volumes in EMEA of €16.6 bn, marking a 64% increase year-on-year, are unlikely to be matched over the next two quarters, but liquidity is expected to remain high in the coming months.
Jeremy Eddy, head of EMEA living, hotels & hospitality capital markets, JLL, said: 'The short-term impacts of the pandemic on economic growth and business activity is undeniable. The future performance of the different living sectors will vary significantly as the real estate industry adjusts to the new reality.'
Student housing outlook
The student housing and healthcare sectors have come under high scrutiny given the ongoing effects of the pandemic, according to the report.
The first quarter of 2020 represented a record start to the year for student housing, with volumes reaching €6.2 bn, surpassing previous totals of €2.1 bn in 2018 and €1.2 bn in 2019.
This total was buoyed by activity in the UK, which accounted for over 90% of total volumes in Europe, due in part to Blackstone’s purchase of British student accommodation group iQ for €5.4 bn – the largest private property transaction in the UK.
The impact on student housing investors, operators, and developers has been significant and student demand for the new academic year will vary across the region due to the travel and physical distancing restrictions. Encouragingly, institutional investor demand for scaled, student housing platforms remains resilient.
Healthcare under spotlight
Q1 healthcare investment volumes in the region were strong, with a series of significant transactions, but activity in Q2 and Q3 will likely remain subdued, not least because of the difficulty for investors and advisors to gain access to sites for due diligence.
However, dry powder allocated to the sector remains high and the strong underlying interest in the sector means deals should pick up again towards the end of 2020, assuming access restrictions are relaxed.
Coliving risks
Covid-19 has put the spotlight on shared living arrangements, where higher density living and increased collaboration spaces could have potentially heightened the risks of transmission. Despite some operational challenges, most coliving companies have responded well to the crisis, leveraging the benefits of their service-driven model, JLL suggests.
With fundraising and institutional appetite for this asset class remaining strong, capital deployment in the sector is set to grow in late 2020 and early 2021.
Adam Challis, head of capital markets research & strategy, EMEA, JLL, added: 'This pandemic will undoubtedly change the way we live and work for the foreseeable future, and new trends will emerge that will become part of our 'next normal.
'We believe that investors will be looking for opportunities to capitalise on the changing demographics in the region, which will continue to be the main drivers and challenges for the living sector.'
