Europe’s living sector experiencing rapid growth

The European living sector is undergoing rapid transformation, attracting institutional investors seeking stable, long-term returns, according to research by CapitalLand Group.

Citadines Islington

Limited supply and high rental demand, especially in major cities, are creating significant investment opportunities, particularly in the private rented sector (PRS), co-living, and purpose-built student accommodation (PBSA). The hotel and serviced residence sectors are also rebounding strongly due to the post-pandemic travel recovery.
Rising housing costs, shrinking homeownership affordability, and changing demographics are pushing more people towards renting. The rise of digital nomads and 'bleisure' travel is increasing demand for flexible, long-term accommodations. A growing student population, particularly from Asia, further intensifies demand for various housing options.
This overall increase in demand underscores the need for greater government support to increase housing supply.
Investors are attracted to the sector's resilience and potential for long-term returns, leading to increased investment and larger deals, particularly in the UK, which remains the most liquid market, Germany, and France. Emerging markets like Spain and the Netherlands are also gaining traction.
The European living sector spearheaded real estate recovery in 2024, with a 49% year-over-year increase in investment volume, exceeding all other sectors. Investments in the private rented sector, including co-living (+38% year-on-year), purpose-built student accommodation (+32%), hotels (85%), and serviced residences (77%), all saw substantial growth, driven by the travel rebound and investor interest in recession-resistant assets like PRS.
Key trends include a blurring of lines between different living asset classes, with operators creating hybrid models to cater to broader demographics. Sustainability is also a major focus, with ESG regulations influencing investment decisions and operational strategies. Refurbishment and conversion strategies are gaining popularity due to rising construction costs.
Overall, the European living sector offers attractive opportunities for investors seeking stable, long-term returns in a market supported by strong underlying demand drivers.