Market Trends of Europe Residential Construction Industry
Increasing in Investments in Multifamily Residential Construction
Demand for high-quality rental accommodation is increasing across Europe, driven by rising house prices, urbanization, and changing consumer preferences. Furthermore, multi-family is one of the few asset classes where landlords can regularly rebase rents to capture growth, driving strong income returns. Over EUR 27 billion (USD 29.64 billion) was allocated to multi-family real estate in Europe in the first quarter of 2022.
Germany was Europe's largest multi-family market, with approximately 28% of the investment value. Denmark and France ranked second and third with approximately 18 and 13%, respectively. According to the industry association, investment volumes grew significantly between the first half of 2020 and 2021 in some surveyed countries, such as Finland, Poland, Denmark, and the UK.
Many multi-family housing construction projects are commenced to meet the increasing demand in Europe. For instance, the Sackville Road Residential Community project (USD 332 Million) involves the construction of a residential community comprising six blocks ranging from 2 to 15 stories on 3.59 ha of land in Hove, the UK. Construction work started and is expected to be completed in Q2 2025. The project aims to transform the Sackville Trading Estate and Hove Goods Yard site to provide better regional housing facilities.
Additionally, Clapham Park Regeneration Phase II project (USD 2,039 million) involves the construction of a residential community comprising 2,400 multi-story homes ranging up to 14-story on 36 ha of land in South London, Greater London, The UK. Construction work started in Q2 2022 and is expected to be completed in Q4 2025. The project aims to demolish 864 residential homes.
Germany is Gaining the Significant Growth in the European Market
The market in the country is driven by the huge number of immigrants residing in the country demanding new homes. Furthermore, the market is driven by government initiatives to provide affordable housing and fulfil the housing demand increasing in the country.
Germany’s robust economic growth has fuelled demand for housing, and the country’s stable political and social environment has made it an attractive destination for investors and residents. Germany has Europe's strongest economy and clear urbanization trends, making it especially receptive to NREP's expertise in improving city-built environments. It is capable of developing more customer-focused products and implementing ESG initiatives more broadly, which has proven to be a successful strategy when expanding into new Northern European territories.
NREP has formed a long-term joint venture with Artisan Group, a major Swiss real estate developer operating across European markets, for its first German investment. The joint venture intends to deliver 5,000 co-living apartments by 2025, with the first investment consisting of the purchase of two co-living assets totaling 314 individual apartments. One of the assets located near Berlin's new business district Mediaspree will be DNGB Gold certified once completed in 2024.
The green transition is one trend that will have an impact on the German real estate market in the future. The German government is strongly encouraging energy-efficient housing because the building sector accounts for 16% of total greenhouse gas emissions in Germany. Recent plans to reduce reliance on Russian oil and gas could hasten the green transition in housing. The "Immediate Action Program 2022" will add five billion euros to promote energy-efficient building refurbishment and new construction, including social housing.
