Investment in the living sector will rival the volumes of more traditional tertiary real estate assets such as offices over the next decade as capital allocations vary and portfolios continue to diversify.
According to JLL, in 2030 a third of all global direct investment in real estate will be in the living sector, up from 25% in 2020 and 14% in 2010. The sector's share of capital flows will continue to be driven by positive demographic trends and favorable factors for the economy and capital markets, which will boost expansion in consolidated markets and accelerate growth in emerging markets in Asia-Pacific and Europe.
Analysis in JLL's "Growth Opportunities in Living Industry" report reveals that capital flows into the industry have accelerated over the past five years.
These are mainly concentrated in the conventional multifamily or build-to-rent housing construction segments, as investors increasingly recognize the favorable profitability profile, growth opportunities and fundamentals in terms of investment. leasing offered by these living assets.
In 2020, worldwide, investors assigned a total capital to the living sector close to 200,000 million dollars and it is foreseeable that their predisposition towards these assets will increase in the face of increasing urbanization and other factors, such as the affordability of houses.
"Competition for the living product has intensified around the world and there is no indication that investor interest in this type of asset will diminish. After acknowledging the stability of cash flows and the resilience of the activities of the living sector, especially during cycles and periods of economic uncertainty, investors and developers have broken in forcefully and expanded their position in the market, and will seek to expand beyond established institutional markets", adds Sean Coghlan, global head of capital markets research in JLL.
Living sector evolution depends on demographics, economics and regulation
Opportunities in the living sector depend on key demographic trends, economic fundamentals and local regulations, the company says, factors that have driven the development of mature sectors in geographic areas such as the United States, Germany, the Netherlands and the United Kingdom.
Although only a small number of markets are currently considered mature, sectoral prominence is intensifying in economically powerful countries such as Australia and Canada, while the consolidation of home ownership is evident in smaller European countries and opportunities continue to abound in regions of hard access.
However, the analysis shows that the potential risks and returns are not evenly distributed and that markets with the greatest imbalances between supply and demand offer the best opportunities for penetration and growth in the sector, although they present more challenges for investors than mature markets.
According to JLL, the considerations and demand catalysts listed below highlight the existing opportunities in the living sector and its development potential in the markets: urbanization in recent decades has caused imbalances between supply and demand, as well as as housing affordability issues in many markets; the movement of the population represents a key issue in the demand for housing; the aging of the millennial population will be complemented by generation Z, highlighting the opportunities for sustained growth that exist in the medium and long term; Homes for sale have become less and less affordable for much of the world's population, and national and local regulations can influence the viability and scope of the home rental and sale markets.
"The change in investment allocations in the living sector has been truly extraordinary and can benefit societies around the world, as we see improvements in the quality and volume of the rental park, as well as increased professional management. As the sector continues to mature and expand into new regions, buyers and credit institutions continue to grow and diversify. We will continue to see a diversification of capital flows that will lead to increased competition for the product in the market and will direct customers investors to living markets that were previously in a nascent state in Europe", says Adam Challis, executive director, research and strategy for the EMEA region at JLL.