PBSA overtakes Multifamily as the most sought-after sector
Introduction
In recent years there has been increased diversification by investors away from traditional commercial real estate sectors and into operational real estate. This is evident across Europe from the marked increase in the proportion of total real estate investment flowing into the OpRE sectors, which has risen from 25% in 2014 to 37% in 2024. That trend continued in the first quarter of 2025, with 38% of total investment being into the operational sectors.
Our 2025 European OpRE Investor Sentiment Survey shows that this trend is set to continue. Now in its third year, Savills and Savills Investment Management have undertaken a survey of major European investors who are active within the operational real estate (OpRE) sectors. We have defined OpRE as the investible universe of residential sectors (Multifamily, Single Family, Affordable Housing, PBSA, Co-living, Senior Housing), as well as Hotels (which includes Mid-Market, Lifestyle, Luxury, Budget, Hostels, Serviced Apartments and Branded Residences), and Self Storage.
The survey gathered responses from 61 investors, who collectively have almost €720 billion in real estate assets under management (AuM). Around two-thirds (67%) of investors are based in the UK, with the remaining 33% based in continental Europe.
A rise in investors seeking exposure to the OpRE sectors
In our 2023 and 2024 surveys, we found a growing number of respondents intending to increase the proportion of their AuM that was allocated to the OpRE sectors. In 2025, this figure decreased to 23%, perhaps demonstrating that investors have now already rotated their AuM significantly into OpRE and so have less scope to increase their proportional allocation to the sectors.
The continued appetite for OpRE, however, is clearly demonstrated by two-thirds of investors confirming that they expect their allocation to remain stable, a substantial rise from 44% in 2024 and indicating a more established and sustained commitment to the sectors.
In which sectors are investors already invested?
The three most common sectors identified by investors as those they are already invested in were Multifamily (51%), Purpose-Built Student Accommodation (PBSA) (51%) and Care Homes (36%).
Within the Hotel sector, the most common subsector is Lifestyle Hotels, where a quarter of respondents have exposure. By contrast, only 7% of investors have exposure to Branded Residences and 15% to Affordable Housing, highlighting the more niche segments of Living and Hotels.
Which sectors are investors targeting?
PBSA has risen to become the most sought-after sector for investors, with 62% of respondents intending to target PBSA over the next three years. This is the first time the sector has topped the list, surpassing Multifamily (57% of respondents), which had held the top spot for the previous two years.
Other notable changes between our 2024 and 2025 surveys include a rise in the proportion of respondents looking to invest in Senior Living and Care Homes, which rose from 29% to 41% and from 16% to 35%, respectively. This comes after a challenging few years for the Care sector, which has faced headwinds in many markets as a result of a number of factors, including rising operating costs. There has also been a rise in investor appetite across the Hotel sector.
Our 2025 survey shows that most sub-sectors have seen an increase in the proportion of investors targeting them. In many of the sectors where the proportion of investors targeting them has declined slightly, the level of interest is still very high, and the decline could be due to factors such as those investors having already deployed a lot of capital into those sectors in recent years.
Comparing the investment targets for UK and European-based investors shows some divergence. Single Family Rental remains a sub-sector largely driven by UK-based investors, with over half of UK respondents looking to invest, compared with just 10% of the European investors.
By contrast, European investors are showing a greater desire for Social Housing, with 20% of respondents targeting the sector compared with only 11% of UK respondents. There is a growing need for the delivery of below-market rented housing across the continent as households face rising housing cost pressures. At the same time, governments across Europe are increasingly turning to the private sector to channel direct investment into the delivery of new Social Housing.
How much capital are investors aiming to deploy?
Our survey reveals that respondents are looking to invest c.€50bn over the next three years across the OpRE sectors. The vast majority (73%) of this capital is targeting the Living sectors, with Multifamily (€8.1bn) and PBSA (€7.4bn) expected to see the greatest inflows of capital.
Within the Hotel sector, budget hotels look set for the greatest influx of capital, with respondents hoping to deploy €2.9bn into the sector over the coming three years. This is despite fewer respondents looking to invest in the sector compared with serviced apartments and mid-market hotels, indicating that those who are targeting budget hotels are looking to grow significant holdings.
Regional expansion
When investors were asked where in Europe they are targeting, the UK and Ireland was the highest priority market over the next three years, mirroring the 2023 and 2024 trend.
Southern Europe (Italy, Spain, and Portugal) retains its position as the second most targeted region, with a growing proportion of investors now ranking it as their highest priority. This reflects the continued growth of investment opportunities in Southern Europe, underpinned by the resilience of these markets, particularly when compared to the DACH region (Germany, Austria, Switzerland), which has slipped to fifth place in investor priorities, down two positions from last year.
Notably, 2025 has seen a resurgence in appetite for pan-European strategies, with 16% of respondents prioritising pan-European investments, up from 10% in 2024. This trend is most evident in sectors such as PBSA and Lifestyle Hotels, where investors are confident in pan-European demand and are seeking opportunities to scale platforms across multiple European markets.
In search of higher returns
There has been a marked shift in the strategies investors are pursuing in the OpRE sectors, which mirrors that reported in 2023. There has been a fall in the proportion of respondents targeting Opportunistic strategies, down from 25% in 2024 to just 11% in 2025. Instead, more respondents reported targeting Core-Plus strategies, up from 18% in 2024 to 41%.
The increase in investors with lower return hurdles will bring greater certainty to those developing new stock that there is an exit, and support the continued recovery in investment activity through the second half of 2025 and into 2026.
The decrease in Opportunistic strategies reflects the slight reduction in expected returns for stabilised Multifamily assets. In 2024, 63% of respondents expected to see unlevered returns of 8% plus over the next three to five years, whereas this has fallen slightly to 55% in 2025. This is, however, still significantly higher than the 30% reported in 2023.
Routes to market
When asked about their preferred routes to market, over half of respondents (52%) had a preference for direct private market investment, an increase from 42% in 2024. There was also an increase in the proportion of respondents using joint venture (JV) structures, up from 22% in 2024 to 28% in 2025. Some of the key benefits of JV structures are that investors can mitigate risks while gaining wider knowledge and expertise in order to access new markets.
There was also a large minority of respondents who are looking specifically at Debt strategies to gain exposure, with 9% of all respondents listing direct private debt as their preferred route.
Barriers to investment
There is no denying the scale of ambition amongst investors to increase their investment in the OpRE space. However, there remain some potential barriers to achieving these aims.
Respondents emphasised that rent regulation is their greatest current concern, with a third of respondents strongly agreeing this was a risk and a further 52% agreeing it is somewhat of a risk. This indicates a widely held feeling that tightening regulations, such as the Renters Rights Bill in the UK and the IRAV in Spain, could be a significant disruptor to the growth of investment in some OpRE sectors. Access to stock and the ability to scale up platforms also continue to be a concern for 65% of respondents.
On the other hand, respondents are less concerned this year about the availability of development debt, with only 7% strongly agreeing this is a risk factor, down from 13% in 2024. Similarly, only 6% of respondents see large risks in environmental regulation.
Rising to the ESG challenge
Almost 90% of respondents agreed that demand for ESG-compliant OpRE assets will increase over the next five years. The relative youth of many OpRE assets places them in a favourable position compared to other sectors, especially in newer sectors like PBSA and Self Storage, given the backdrop of increasing regulation for greener properties and shifting consumer priorities that favour more socially conscious developments. It does, however, stress the need for investors to maintain and proactively improve stock.
When asked about the main challenges to advancing ESG adoption, respondents identified higher construction costs as the most significant barrier. The use of more sustainable materials and construction practices can increase construction costs, on top of the current industry-wide build cost inflation, affecting both new developments as well as the retrofitting of existing assets.
The second most cited concern was the lack of clear ESG regulation and enforcement. Ambiguous or frequently evolving ESG standards can mean previous investment in improving stock may be quickly superseded, especially in refurbishments, leading to yet further costs.
Respondents were not, however, overly concerned by supply chain issues for green materials or the availability of green financing and government incentives. This demonstrates that the mechanisms for achieving greater ESG adoption are present and understood; it’s the implementation that is the more pressing concern.
Conclusions
- Investment into the European OpRE sectors continues to grow as investors continue to diversify and rotate capital from the commercial sectors. Our 2025 European Investor survey indicates that this trend is set to continue, with our respondents looking to deploy more than €50bn of capital over the next three years.
- Investors are increasingly looking beyond the traditional Multifamily sector for exposure to OpRE. While it remains a key target, PBSA has risen up the ranks to become the most sought-after OpRE sector this year. Senior Living, Care Homes and Budget Hotels have also moved up the priority list for investors.
- As interest rates have fallen, we have seen a return of Core-Plus strategies from investors, while the proportion targeting Opportunistic returns has fallen. The re-emergence of these Core Plus buyers will help support the continued recovery of investment activity through 2025 and beyond.
- Governments are tightening environmental performance regulations for real estate, with a range of new standards expected to be brought in over the next five years. As a result, investors are increasingly cognisant of the need for ESG-compliant properties, and so we expect that demand for these will continue to rise.