Research article

Residential investment

Investment into ‘alternative’ residential assets continues to increase, at a time when investment into other asset classes is declining. The sector is benefiting from investor focus on operational assets and favourable structural changes in demand

The global picture

Investment in commercial real estate declined in the first half of 2019, down by 10% compared to the same period a year prior. Global economic and political headwinds have impacted investor sentiment, while stock levels have generally remained low as investors buy to hold meaning less suitable assets are coming to market for purchase.

In the search for income-producing assets, investors are shifting their focus towards operational-type assets. Student, senior and multifamily housing are key beneficiaries.

Investment in residential increased by 9% in the year to H1 2019, at a time when investment into all other major asset classes declined.

Quantifying residential investment

Total global residential investment volumes are second only to office investment. Investment into the sector has risen rapidly, increasing by 56% over the past five years. In the year to H1 2019, residential investment volumes were three times that of hotels, and 50% greater than retail and industrial.

Developer owner-operators still comprise a large share of total investment in the sector, accounting for over half of total volumes in 2018, while institutional investors accounted for around 40%.


Multifamily is by far the largest of the three sub-asset classes. Global investment reached record levels in 2018, exceeding $210bn, an increase of 14% over 2017 levels. Despite global headwinds, investment into multifamily has been sustained with $97bn invested in the first half of 2019, a 13% increase from the same period in 2018.

The US is the largest market globally in terms of multifamily investment, but the asset class is also well-established in European markets such as Germany, Spain and the Netherlands.

According to Savills data, multifamily investment in 2018 reached over €40bn (around $45bn) across eight core European markets (Denmark, France, Germany, Ireland, Netherlands, Sweden, UK and Spain) for the first time, representing a 27% increase from 2017. In half of the markets (Denmark, Sweden, Netherlands and Spain), multifamily investment was also greater than office investment for the first time.

Student housing

Investment into student accommodation globally totalled $17.4bn in 2018, marginally down on 2017 volumes, but the third year in a row that volumes exceeded $16bn. The US and the UK are the most mature markets for this sector, accounting for 63% and 23% of investment respectively in 2018, while Western Europe accounted for 12%.

Activity has slowed significantly in the first half of 2019, down 39% compared to H1 2018. Falls were recorded across all regions. Volumes in the US fell by 40%, in the UK by 39%, and by 32% in Western Europe. Full supply in some UK and US cities, together with fewer portfolios coming to market may account for this while stock shortages have restricted investment in Western Europe.

Senior housing

Investment volumes into senior housing neared $15bn in 2018, a 17% decline from 2017. However, much like multifamily, interest in senior housing remained strong for the first half of the year, with volumes totalling $7.6bn and a marginal (2%) increase from the first half of 2018.

The US is the largest market globally for senior housing, accounting for 66% of volumes in 2018. The UK and France were the second and third largest for the same year, accounting for 9% and 8% of investment respectively.

Funds and allocations to residential

As residential assets have moved from alternative to the mainstream, a growing number of investment funds are targeting the sector. Open-ended funds have allocated a growing share of their investment to residential assets, increasing their holdings from 7% in 2016 to 30% in 2018. For the first half of 2019, residential accounted for almost three-quarters (72%) in open-ended investments (see chart).

Much of this rise can be attributed to German fund manager Union Investment, which has allocated a much larger share of capital towards the residential sector. In the first two quarters of 2019, residential has accounted for 76% of Union Investment’s open-ended investments, according to RCA, up from 12% just two years ago. This increase followed the launch of a residential fund in 2017 with a focus on apartments, student accommodation and micro apartments.

A number of these funds in Europe now operate across multiple countries. In April 2018, Aberdeen Standard Investments launched the first open-ended property fund of its kind to invest in the residential sector on a pan-European basis. German-based investment manager Catella launched its third open-ended pan-European residential fund in March 2019, focusing on multifamily as well as student and senior housing.

Cross border investment

As interest in residential has grown, investors are looking across borders for new opportunities. Cross border investment in residential stood at $51bn in 2018, accounting for 21% of total investment in the sector. This is up from $22bn in 2013 when it accounted for 13% of total investment.

Student housing attracts the largest amount of cross border capital as a proportion of total investment. In 2018, it made up a quarter of total investment (the year prior it accounted for almost half ). This is a higher share than seen even in the office sector (see chart).

Multifamily and senior housing are much more domestic by comparison: cross border investment accounted for just 16% and 15% of investment respectively in these sectors in the first half of 2019.

Where does the cross border capital come from?

A wide range of investors are involved in the buying and selling of these three asset classes. Major institutional players from the US and Canada have led the way in cross-border acquisitions. The United States and Canada have accounted for 44% of cross border investment alone in the last six years. The biggest players are Brookfield Asset Management (Canada), Blackstone (US), CPP Investment Board (Canada) and Cerberus (US).

Cross border investment into student and senior housing has been led by a smaller number of pioneering investors. Between 2013 and 2018, the top five players accounted for 59% and 37% of the total cross border investment respectively compared to 26% for multifamily in which a larger number of investors are active.

At a European level, Germany’s Vonovia and Sweden’s Heimstaden are actively purchasing assets in other European markets such as Austria and Denmark respectively.

In the case of student housing, a range of global players are active in the market, including large scale owner-operators (such as Greystar), pension funds (led by CPPIB) and sovereign wealth funds (such as GIC) and large overseas investments are not uncommon as large portfolios have traded. Consequently, the composition of overseas investment can vary year-to-year. Investors from Singapore have played a much more active role since 2016, for example.

Investors from the US also make up a large share of overseas investment into senior housing, accounting for almost two-thirds of all overseas investment between 2012 and 2015. However, in recent years a wider range of cross border players have entered the market and large volumes have come from countries such as France and China.

These include France’s Primonial REIM following their acquisition of the Panacea portfolio comprising of 68 assets across Germany, and China’s Anbang Insurance Group who purchased a majority stake in Retirement Concepts, a provider of assisted and independent living across Canada. As much of the world’s population ages, we can expect a greater range of global players to invest in the asset overseas.

Multifamily and Student Housing yields

For both multifamily and student housing, yields have generally moved in recent years as the residential asset classes have moved into the mainstream and now attract a wider range of investors. Student housing tends to yield greater returns across the majority of markets. On average, it yields 98 basis points higher across 13 countries globally.

Read the articles within Report: Global Living below.

Other articles within this publication

8 other article(s) in this publication