Savills: Multifamily now firmly established as Europe's second biggest real estate sector

During the past few quarters, investors have shown confidence in the defensive characteristics of multifamily, increasing their allocations in the residential sectors and launching new funds. Multifamily accounted for about one third or more of the activity in Sweden (31%), Spain (32%), Germany (32%), Denmark (34%) and Finland (42%).

Marcus Roberts, Savills Operational Capital Markets head of Europe, says: "Intense competition has been pushing yields down rapidly. In 2020, prime yields reached record low levels with a European average of 3.2%.

"However, the multifamily yield spread over long-term bond yields remains attractive at 290bps compared to a long-term average of 237bps (2012-2021) and, given the ongoing attractiveness of the sector we expect to see new investor groups enter the market and established investor groups to look at new geographies as competition intensifies."

Eri Mitsostergiou, director, Savills European research, adds: "The combination of rising demand for rental and the structural undersupply of housing are driving up rental prices in Europe. Since 2015, average multifamily rents have been rising by 4.6% pa on average across the 27 cities that we analyse. As the pace of new housing supply fails to meet demand in most major European cities, rents are expected to continue to rise."