UK: Purpose-Built Student Accommodation (PBSA) has overtaken multi-family as the highest priority target sector for European operational real estate investors, according to new research.
The third annual survey conducted by Savills and Savills Investment Management saw PBSA top the list of asset classes for the first time. for the first time.
The report polled respondents who collectively have almost €720 billion of real estate assets under management (AuM).
The highest priorities for the investors surveyed are:
• PBSA – 62% (63% last year)
• Multifamily – 57% (84%)
• Single Family – 41% (49%)
• Senior Living – 41% (29%)
• Coliving – 35% (39%)
• Care Homes – 35% (16%)
In terms of geography, the UK and Ireland, followed by Southern Europe (Italy, Spain, Portugal) and Western Europe (France and BeNeLux), are the highest priority markets for investors over the next three years. Year-on-year, the number of investors pursuing a pan-European strategy increased from 10% to 16%.
Looking at target returns, Core-plus is now the most popular strategy for those active in OpRE (41%, up from 18% last year), followed by value-add (30%, down from 34%) and core (19%, down from 23%). This is a positive indicator for the market and should support a recovery in investment activity through the second half of 2025 and into 2026.
Marcus Roberts, head of Europe – Savills operational capital markets, said: “Our survey reveals that respondents are looking to invest c.€50 billion over the next three years into Operational Real Estate (OpRE). The majority (73%) of this capital is targeting the Living sectors, with multifamily (€8.1 billion) and PBSA (€7.4 billion) expecting to see the greatest inflows of capital.”
Richard Valentine-Selsey, head of European living research & consultancy at Savills, added: “The vast majority of respondents, almost 90%, agree or strongly agree that demand for ESG-compliant OpRE assets will increase over the next five years, while the biggest barriers to increased ESG adoption are higher construction costs, lack of clear ESG regulations and enforcement and the difficulty in measuring ESG impact. Encouragingly, the majority of our clients are pushing ahead and implementing the ESG targets they have set themselves.”
Charlie Bottomley, director, Savills Capital Advisors, debt advisory, said: “We continue to see robust liquidity across both bank and non-bank channels, driven in part by the continued low level of transaction volumes. With fewer deals in the market, lenders are competing intensely for opportunities, particularly in the OpRE sectors, which remain a top priority for most capital providers.”
Harry de Ferry Foster, head of the UK, Savills Investment Management, added: “As the most mature sub-sectors in living, we would expect to see European PBSA and multifamily anchor institutional OpRE portfolios – especially in a countercyclical macroeconomic environment. Equally interesting is the deepening demand for exposure to nascent asset categories like senior living, co-living and care; reflective of a broadening base of opportunities available to investors in living, but also growing market sophistication.”
Click here to see the Savills report.
Highlights:
• Purpose-built student accommodation has overtaken multi-family accommodation as the highest priority target sector for investors
• Savills and The Class Foundation predicted that the European PBSA sector could see 70 per cent growth over the next five years.
• Core-plus is now the most popular strategy for those active in OpRE (41%, up from 18% last year), followed by value-add (30%, down from 34%) and core (19%, down from 23%)
