Investor conviction building in the U.S. and Europe

There were signs of continuing recovery in the U.S. living market during Q3, with Europe following closely behind. However, living activity in Asia Pacific was subdued as levels were well below recent norms. Investment sentiment in the U.S. has been buoyed by the Fed’s 50bps rate cut in September, while rental housing demand has also stayed solid despite significant spikes in supply on the back of a resilient economy. Meanwhile, EMEA saw living’s share of all direct real estate investment rise to 35%, the highest of all commercial property sectors.

Signs of increasing conviction in the sector were evident in both the U.S. and Europe. Some US$26 billion in transactions closed during the quarter in the U.S., bringing the year-to-date total to nearly US$86 billion, in line with 2023. Investment in Europe’s living sector maintained the momentum of the second quarter, with €11.7 billion in activity for Q3 reflecting a 7% uplift quarter-on-quarter. Year-to-date investment in Europe is now 5% above 2023, although yet to return to the longer-term trend. In Asia Pacific, limited available stock held back activity, with transaction volumes finishing the quarter at just US$1 billion, 17% lower than the same point last year.

Future trends: Accelerating demand across living types attracting a greater share of capital

Outlook for 2025: The living sectors are set for a strong bounce in investment activity in 2025 as central banks move further into their interest rate cutting cycles. Larger deals will become a more common feature in the U.S. and Germany in particular. More than one-third of global capital will be deployed in rental housing sectors against a backdrop of housing shortages in many countries and global city population growth continuing at a rate of circa 200,000 additional people every day.

Long-term: Structural changes in demographics will continue to increase demand for a greater variety of living asset types across many major countries including the U.S., Canada, UK, France, Germany, Australia and Japan. Global student demand, rising life expectancy, urbanization growth and falling household sizes will drive growth for living models such as PBSA, later living and coliving. Capital flows will continue to strengthen against the long-term growth trajectory in major living markets.