• Urbanisation and demographics will boost Private Rented Sector, student accommodation, care homes and hospitality

  • Largest alternatives market is the UK, followed by Germany and Sweden

Long-term trends in urbanisation and demographics will boost the alternative segments of Europe’s property market, which includes the Private Rented Sector (PRS), student accommodation, care homes and hospitality, according to Savills Investment Management (“Savills IM”), the international real estate investment manager.


Key attractions in these alternative sectors include long leases, indexed rental uplifts, better covenants and the potential to diversify portfolios. Prime yields are now at or below 6%, with scope for further compression as these markets develop and mature.


Savills IM believes that the key sectors set to see strong activity this year include the PRS, automotive, hospitality and socio-infrastructure markets in the UK, Germany, France, the Netherlands, the Nordics and increasingly Spain. The largest alternative real estate market is in the UK, with EUR 9.9 billion in 2015, followed by Germany (EUR 5.2 billion) and Sweden (EUR 3.5 billion).


In a report entitled Changing Landscape: European Outlook, Savills IM says alternative sectors are set to attract investors who have long-term strategies and can benefit from stable, long-term income. Despite this growth potential, however, the report says alternatives pose some challenges for investors, including transparency that is lower in certain segments than in the mainstream market. Investors also need to consider the level of maturity in the market, stock selection, business models/ease of entry, occupiers’ ability to service rent, covenant strength and exit strategies.


Kiran Patel, Chief Investment Officer at Savills IM, commented:

 “Historically, the European real estate investment market has been focused around the main commercial property types of retail, office and industrial.


“However, rising competition for the best assets in these traditional markets is out-pricing some investors, who are interested in higher returns and are prepared to take more risk. These investors are looking into niche market segments, and are partnering with strong local players to benefit from higher returns.


“We have no doubt that the alternative real estate sector will further increase its share of the real estate investment universe over the coming years in Europe.”



Citigate Dewe Rogerson

Patrick Evans / Stephen Sheppard / James Madsen / Alice Stewart

Tel: +44 (0)20 7282 2966

E: savillsim@citigatedr.co.uk

Savills Investment Management

  • About Savills Investment Management (Savills IM)Savills Investment Management is an international real estate investment manager with offices in Copenhagen, Frankfurt, Hamburg, Hong Kong, Jersey, London, Luxembourg, Madrid, Milan, Munich, Paris, Singapore, Stockholm, Sydney and Tokyo
  • As at 31 March 2016, Savills Investment Management managed a total of c.€17 billion of assets
  • Savills Investment Management is the brand name for entities in the Savills Investment Management group, including Savills Investment Management LLP, Savills Investment Management (UK) Ltd, Savills Investment Management (Luxembourg) Sàrl, Savills Investment Management (Jersey) Limited, Savills Investment Management SGR SpA, Savills Investment Management (Germany) GmbH, Savills Investment Management KVG GmbH, Savills Investment Management Pte Ltd, Savills Investment Management Asia Limited and Savills Investment Management (Hong Kong) Limited
  • Savills Investment Management LLP is a limited liability partnership registered in England No: OC306423 regulated by the Financial Conduct Authority 
  • Savills Investment Management is regulated in the UK, Italy, Germany, Jersey, Japan and Luxembourg.
  • 20 March 2017