Buoyant demand boosts investment

Global Real Estate Perspective May 2022

Buoyant buyer demand boosted by strong investment fundamentals has continued to drive investment activity across the Living spectrum globally, with the sector continuing its momentum into Q1. Total living investment in the quarter was up 44% on the start of 2021 at US$83 billion, with quarterly volumes at all-time highs in the Americas, and increasing in Asia Pacific. Despite a modest decline in quarterly volumes year-over-year in EMEA, activity remained well above historic first quarter norms. While inflationary pressures and rising construction costs suggest some headwinds, the sector remains one of the most favored across the regions.

This article is part of JLL’s Global Real Estate Perspective

Future trends: Inflation pressures likely to impact development

Outlook for 2022: Rising construction and material costs will impact a sector which is relatively reliant on forward deals and investments into new-build developments. Some developments may be put on hold, while income-producing assets will likely command a premium. Cost of living pressures will dampen short-term rental growth prospects, though strong resident demand in the tightest markets will continue to push up rents. Finally, as the cost of debt rises, downward pressure on pricing is probable due to the increased cost of financing – particularly in the U.S. and Europe – though still balanced against robust equity investment demand.

Long-term: As the sector continues to mature, platform deals will remain attractive routes to market for investors looking to access scale. ESG incentives will be at the forefront of investors’ mindsets when buying or building portfolios, with a particular focus on energy performance and creating social value. Structural factors and portfolio diversification imperatives will create a wider Living investment market through the growth of sub-sector asset classes, such as student housing (where it is still niche), manufactured homes and senior living.