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European Capital Cities Primed For Post Pandemic Rental Market Rebound

24/06/2021
  • Amsterdam, London, Stockholm, Paris and Dublin make the Top 10 in Cushman & Wakefield’s ‘global rental rebound ranking’ 
  • Build-to-rent markets in these locations set for rapid recovery post-pandemic with strong investment potential 
  • Generation Z renter demand, lower ownership affordability, fast-growing foreign populations and effective vaccination programs are all key factors 

Europe’s capital cities lead the way for their rental market recovery prospects post-pandemic, with its build-to-rent markets ripe for rapid growth and investment, according to the latest research from real estate advisory firm Cushman & Wakefield.  

With the global pandemic temporarily negating the traditional advantages of global urban centres, Cushman & Wakefield examined 27 ‘global gateway’ markets against a number of market performance drivers, revealing which exhibit the most favourable conditions for a rebound in rental market fundamentals and investment. These combine to create Cushman & Wakefield’s ‘Multifamily* market rebound ranking’, with half of the top 10 spots occupied by European cities.  

David Hutchings, Head of EMEA Investment Strategy at Cushman & Wakefield, said: “With major cities across Europe experiencing an undersupply of high-quality and affordable private rented homes, build-to-rent will continue to be an attractive and rapidly growing asset class, despite the challenges of the pandemic. Our analysis shows that several key cities in the region, including Amsterdam, London, Stockholm, Paris and Dublin, are set to see a robust build-to-rent rebound, due to a range of factors including favourable population demographics, trends toward renting over home ownership and a strengthening pipeline of purpose-built rental units.”

 

Multifamily Rebound Ranking

 

Market Region Rent Momentum (8%) Supply Shifts (12%) Generational Turnover (16%) Market Dominance (16%) Homeownership Conversion Risk (12%) Covid-19 Recovery (12%) International Migration Reliance (8%) Capital Market Liquidity (16%) Overall
1 Amsterdam EMEA 4.4 4.4 3.5 3.5 4.6 3.0 1.9 3.5 3.6
2 London EMEA 3.1 2.0 3.6 4.2 4.2 5.0 2.5 3.4 3.6
3 Atlanta AMER 4.2 3.3 3.7 1.8 3.1 3.0 3.9 4.7 3.4
4 Los Angeles AMER 2.5 2.9 3.8 2.0 3.9 4.0 2.3 5.0 3.4
5 Stockholm EMEA 4.4 4.5 3.2 4.2 3.1 3.0 2.0 2.4 3.3
6 Tokyo APAC 3.8 2.0 2.8 4.3 4.0 3.0 3.3 3.1 3.3
7 Paris EMEA 3.9 4.0 4.2 4.4 2.4 2.0 3.1 2.2 3.3
8 Singapore APAC 3.5 5.0 2.2 5.0 1.3 4.0 4.3 1.6 3.3
9 Dallas AMER 3.5 1.4 4.0 1.8 3.4 4.0 2.9 4.9 3.3
10 Dublin EMEA 3.7 3.0 3.7 4.8 3.1 2.0 3.6 2.1 3.2
11 New York AMER 1.2 4.4 3.5 2.4 3.7 3.0 2.0 4.3 3.2
12 Chicago AMER 2.7 4.1 3.8 1.9 3.0 4.0 2.6 3.5 3.2
13 Berlin EMEA 4.2 4.0 2.3 1.9 4.9 3.0 1.5 3.5 3.1
14 Washington DC AMER 2.7 2.4 3.3 2.4 3.1 3.0 3.0 4.5 3.1
15 Mexico City AMER 4.5 4.0 4.1 3.5 1.9 2.0 3.5 1.6 3.1
16 Seattle AMER 2.5 1.1 3.2 2.0 3.3 4.0 3.7 4.0 3.0
17 San Francisco AMER 1.0 2.8 2.9 2.4 3.6 3.0 2.4 4.3 2.9
18 Miami AMER 3.2 1.4 3.2 1.7 3.3 4.0 2.3 3.6 2.9
19 Sydney APAC 1.6 3.0 4.2 3.3 2.6 3.0 2.5 1.8 2.8
20 Toronto AMER 1.2 3.3 3.4 3.3 2.6 3.0 2.2 2.3 2.8
21 Madrid EMEA 2.2 3.0 1.7 3.3 2.6 4.0 3.0 2.3 2.7
22 Hong Kong APAC 2.1 5.0 1.6 3.8 2.2 3.0 2.7 1.6 2.7
23 Melbourne APAC 1.8 2.0 4.3 2.8 2.5 3.0 2.9 1.7 2.7
24 Shenzhen APAC 4.8 2.0 1.2 2.6 3.4 3.0 4.5 1.6 2.6
25 Milan EMEA 3.6 4.0 2.2 2.9 1.8 2.0 3.0 1.6 2.5
26 Shanghai APAC 4.7 2.0 1.1 2.5 1.6 3.0 4.7 1.6 2.4
27 Warsaw EMEA 1.5 2.0 2.0 3.6 1.5 1.0 4.3 1.7 2.2
1 Amsterdam EMEA 4.4 4.4 3.5 3.5 4.6 3.0 1.9 3.5 3.6
2 London EMEA 3.1 2.0 3.6 4.2 4.2 5.0 2.5 3.4 3.6
3 Atlanta AMER 4.2 3.3 3.7 1.8 3.1 3.0 3.9 4.7 3.4
4 Los Angeles AMER 2.5 2.9 3.8 2.0 3.9 4.0 2.3 5.0 3.4
5 Stockholm EMEA 4.4 4.5 3.2 4.2 3.1 3.0 2.0 2.4 3.3
6 Tokyo APAC 3.8 2.0 2.8 4.3 4.0 3.0 3.3 3.1 3.3
7 Paris EMEA 3.9 4.0 4.2 4.4 2.4 2.0 3.1 2.2 3.3
8 Singapore APAC 3.5 5.0 2.2 5.0 1.3 4.0 4.3 1.6 3.3
9 Dallas AMER 3.5 1.4 4.0 1.8 3.4 4.0 2.9 4.9 3.3
10 Dublin EMEA 3.7 3.0 3.7 4.8 3.1 2.0 3.6 2.1 3.2
11 New York AMER 1.2 4.4 3.5 2.4 3.7 3.0 2.0 4.3 3.2
12 Chicago AMER 2.7 4.1 3.8 1.9 3.0 4.0 2.6 3.5 3.2
13 Berlin EMEA 4.2 4.0 2.3 1.9 4.9 3.0 1.5 3.5 3.1
14 Washington DC AMER 2.7 2.4 3.3 2.4 3.1 3.0 3.0 4.5 3.1
15 Mexico City AMER 4.5 4.0 4.1 3.5 1.9 2.0 3.5 1.6 3.1
16 Seattle AMER 2.5 1.1 3.2 2.0 3.3 4.0 3.7 4.0 3.0
17 San Francisco AMER 1.0 2.8 2.9 2.4 3.6 3.0 2.4 4.3 2.9
18 Miami AMER 3.2 1.4 3.2 1.7 3.3 4.0 2.3 3.6 2.9
19 Sydney APAC 1.6 3.0 4.2 3.3 2.6 3.0 2.5 1.8 2.8
20 Toronto AMER 1.2 3.3 3.4 3.3 2.6 3.0 2.2 2.3 2.8
21 Madrid EMEA 2.2 3.0 1.7 3.3 2.6 4.0 3.0 2.3 2.7
22 Hong Kong APAC 2.1 5.0 1.6 3.8 2.2 3.0 2.7 1.6 2.7
23 Melbourne APAC 1.8 2.0 4.3 2.8 2.5 3.0 2.9 1.7 2.7
24 Shenzhen APAC 4.8 2.0 1.2 2.6 3.4 3.0 4.5 1.6 2.6
25 Milan EMEA 3.6 4.0 2.2 2.9 1.8 2.0 3.0 1.6 2.5
26 Shanghai APAC 4.7 2.0 1.1 2.5 1.6 3.0 4.7 1.6 2.4
27 Warsaw EMEA 1.5 2.0 2.0 3.6 1.5 1.0 4.3 1.7 2.2

 

Market performance drivers identified in the report, include: 

1) The pandemic’s impact on overall residential market performance 
Of the 27 global gateway markets, rents fell in all but nine markets in 2020. Home prices, however, rose in all but five markets, suggesting residents in effect ‘doubled-down’ on global urban markets, with a greater commitment to purchasing, indicating confidence in these markets overall. Rents fell in general because the advantages of urban living were negated during the pandemic. Across Europe, some of the largest falls in rents were in London, a higher priced market where one-bedroom rents average 46% of the median gross income.  


2) The key drivers of future rental market performance** 
Europe has trended towards renting in the past decade, with ownership having peaked in 2009 at 73% compared to 69% as of 2020. Berlin, Amsterdam and London have some of the lowest home ownership rates of the cities analysed.  

Inclination to rent varies over the course of a person’s lifetime. Paris has the highest current renter favourability score based on age profile (assuming 18-35 year-olds have the greatest propensity to rent) of all cities analysed. Whereas London, Milan and Madrid have the strongest prospects of replacement renter demand from Gen Z. 

International migration also helps fuel demand for renting. Cities including Stockholm, Berlin, Amsterdam and London all have large and recently fast-growing foreign populations. Whilst this inflow has undoubtedly been disrupted by Covid-19, speed of vaccination and opening up economies to global travel in turn, will help to attract more immigrants. 

Development activity of multifamily space to rent is also increasing across Europe in response to occupier and investor demand, although rents and development regulation still act to keep supply in check in many European markets.  
 

3) Liquidity of the multifamily sector in recent years 
Institutional multifamily capital markets are in varying stages of development across different countries and cities, which necessarily enlarges or constrains investment opportunities. US markets are by far the most liquid and have been for some time. In Europe, Germany leads overall but among gateway cities, Berlin competes with London and Amsterdam to be the largest, most liquid investment markets in the region, though Paris, Stockholm, Madrid and Dublin are rapidly scaling. 

David Hutchings concluded: “The multifamily market is set to gain further favour among investors as cities bounce back from the pandemic and development adds real scalability to the market. Amsterdam, with the highest overall score in our ranking, demonstrates broad-based rebound potential with weakness only in its reliance on immigration. London is similar, but with a greater supply risk due to its less developed build-to-rent market. There are multiple opportunities for investors looking to this region both in northern and eastern Europe and sub-sectors such as social housing provision and student housing development around academic hubs offer real performance potential.”
 

Download the full report 

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