Multifamily Housing Accounted for More than 40% of Irish Investment Spend in H1 2019 - Construction Network Ireland - Construction Network Ireland

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Published in Investment on 23/07/2019

Multifamily Housing Accounted for More than 40% of Irish Investment Spend in H1 2019

#CBRE

CNI Editor reports

Multifamily housing is the second largest sector for real estate investment in Europe, and could become the dominant sector, according to new research by global real estate advisor CBRE. International investors are putting record volumes of capital into multifamily housing in Europe. With €52bn of cross-border capital committed to European multifamily housing between 2015-2018, the new CBRE report Capital Flows into European Multifamily Housinglooks at the origins of this capital and the types of investor moving into this quickly maturing investment class.

CBRE research finds:

  • Steep growth in multifamily housing investment in Europe, and a rise in international capital targeting the sector. Changing regulation, demographics and structural fundamentals have driven the growth of multifamily housing. While historically, investment in multifamily has been dominated by domestic investors, cross-border investment volumes have more than doubled over the last four years, with €17.8bn invested in 2018.In the Irish market, more than 40% of investment in real estate in the first half of 2019 comprised residential investment with Dublin having made it into the Top 10 destinations for cross border multifamily investments.

 

  • Diversification of capital flows, as the sources of cross-border investments in European multifamily housing become more international. CBRE charted the changing share of capital origins by region from 2011 to 2018, showing that while European investors are still responsible for the largest share of the capital flows, the percentage fell from 67% in 2011 to 50% in 2018. North American investors are the most active capital source from outside Europe, having increased their share of capital flows from 24% in 2011 to 44% in 2018.

 

  • The top destinations for cross-border multifamily investments were Berlin, Copenhagen and London, which are cities with established multifamily markets, or rapidly increasing numbers of purpose-built rental developments. However, the top ten cities attracted only 28% of the total cross-border investment, indicating investors can have broad geographical exposure, with smaller cities offering investment opportunities.

 

  • Large (listed) institutional investors and investment managers are the most active types of cross-border investors. CBRE found that European REIT-type investors with long track records have been increasingly diversifying internationally, having built sizeable portfolios in their home markets. North-American capital is a mix of private equity-type buyers from the US and REIT-type vehicles from Canada.

 

  • International investors prefer portfolio transactions. CBRE found cross-border investors have allocated 62% of their capital towards acquiring residential portfolios. This allows cross-border investors to deploy capital at scale, establish platforms quickly and to drive efficiencies. Market accessibility is also a factor for cross-border investors; domestic investors have established relationships with local developers and can acquire single-assets more readily, plugging them into their existing operating platforms.

Marie Hunt, Executive Director & Head of Research at CBRE Ireland said Multifamily is an evolving market in Europe with strong growth potential. “There was a record €57bn invested into multifamily housing in Europe in 2018, but this is dwarfed in comparison to the US, which has the most mature multifamily market in the world. Investment into US multifamily grew from $22bn in 2001, to $175bn in 2018, making it the dominant real estate investment sector there. Given the strong investor appetite, and the continued supply-demand imbalance, Europe could follow a similar trajectory – a trend that is already very much in evidence in the Irish market considering the year-on-year growth in investment being witnessed.”

Top Cities

Top Destinations for cross-border multifamily investments

Rank

City

2014-2018 total

1.

Berlin

€14.8bn

2.

Copenhagen

€11.2bn

3.

London

€7.7bn

4.

Amsterdam

€4.9bn

5.

Stockholm

€3.4bn

6

Hamburg

€3.2bn

7.

Madrid

€3.1bn

8.

Frankfurt

€3.0bn

9.

Munich

€2.1bn

10.

Dublin

€2.0bn

Top ten cities in Europe by cross-border multifamily investment volume in the period 2014-2018

Source: CBRE Research, 2019

To view the research: https://www.cbre.co.uk/research-and-reports/capital-flows-into-european-multifamily-housing