The Generation Game

This report is about demand for living from different generations. We have focused primarily on two: the young and the elderly. They are shaping demand for some of the industry’s fastest growing asset classes.

The rising cost of residential real estate around the world, notably in cities, has made the prospect of owning a home unrealistic for many young people, who are now renting much longer than previous generations.

But this is increasingly a lifestyle choice. City-living, globally mobile, and settling down much later in life, flexible rental products are a natural fit for Generation Y.

At the other end of the spectrum, equity-rich empty nesters are also looking for new ways of living.

Healthier for longer, they want many of the same things Gen Y is looking for: quality accommodation in vibrant urban environments, access to amenities and a sense of community.

Many want be close to their grownup children, who are navigating national and international labour markets. New, flexible residential models are emerging to serve them too.

Student housing has shown how a specialist property investment can become part of the mainstream, and now other residentially related asset classes are following suit.

The market is now responding to under-served occupier groups by offering new and hybrid models that challenge conventional asset classes. Investors, capitalising on the secure income streams they offer, will continue to drive their growth.

Summary

• By 2030, 20-39 year olds will comprise 23% the developed world’s population. Those aged over 65 will have risen to 23%. Understanding the demands of these groups matters as they become major real estate occupiers.

• Youthful cities with strong underlying demographic prospects for purpose-built rental accommodation include Edinburgh, Amsterdam and Copenhagen. Spanish and German cities are ageing fast and may offer potential for new forms of senior housing – but demand exists across the continent.

• Globally mobile students continue to drive demand for purpose-built student accommodation (PBSA), and mainland Europe is attracting more of them. However, PBSA provision remains very low, just 3% in Rome and Porto, and 4% in Florence, Lisbon and Seville.

• Investment in residential alternatives of all types is rising. Big-ticket global residential investment volumes exceeded all global retail or industrial investment in the last year. Global student housing investment volumes have risen 87% in the last five years.

• Multifamily investment across eight major European markets exceeded €27bn last year, up 19% since 2013. Germany accounted for 54% of investment across these countries. Yields average 3.4%, ranging from 2.1% in Germany to 4.3% in the UK.

• Global investors are seeking scale, driving management efficiencies. Student housing has the higher cross-border investment share (46%), but the largest single residential deal last year was cross-border, Blackstone’s $10.3bn investment in Spain.

• The rapid expansion of residential alternatives sectors in the US has been helped by the relative homogeneity of its regulatory environment. Investors in Europe have a much more diverse set of national regulations to navigate.

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