Living Sector To Account For One-third Of Global Real Estate Investments By 2030

Auckland, October 2021 – Investment in the living sector will rival volumes deployed into traditional commercial real estate asset classes, including office, over the next decade as capital allocations shift and portfolios further diversify. Latest research from JLL indicates that by 2030, one-third of all global direct investment into real estate will occur in ‘living’, rising from 25% in 2020 and 14% in 2010.

The sector’s share of capital flows will continue to be supported by favourable demographic, economic and capital markets tailwinds, which will collectively drive expansion in established markets and accelerate growth in emerging markets in Asia Pacific and Europe.

Analysis published in JLL’s Growth Opportunities in Living research report shows that capital flows into the sector have accelerated over the past five years. Capital flows are most concentrated in the conventional multifamily or build-to-rent segments of the markets, as investors increasingly recognise the favourable return profile, growth opportunities and leasing fundamentals offered by these specific living assets.

In 2020, approximately $200 billion in global capital was deployed into the living sector by investors globally, and with rising urbanisation and other factors including housing affordability, the appetite of investors is anticipated to increase.

“Competition for living product has intensified globally, and there are no signs that investor appetite for this evolving asset class will abate. Recognising the cash-flow stability and operational resilience of the living sector, particularly through cycles and periods of economic uncertainty, investors and developers have aggressively entered and expanded their position in the market and will seek to expand beyond established institutional markets,” says Sean Coghlan, Global Director, Capital Markets Research, JLL.

The opportunities for the living sector are dependent on key demographic trends, economic fundamentals and local regulations, says JLL, all of which have driven the development of mature sectors in geographies like the United States, Germany, the Netherlands and the United Kingdom.

According to Paul Winstanley, JLL New Zealand Head of Strategic Consultancy and Australasia Build to Rent (BTR), New Zealand represents one of the most opportunistic markets for BTR in the world, but it is being significantly held back by its high barriers to entry.

“New Zealand is within touching distance of benefitting from substantial investment from the global living market. BTR here is an exciting sector for investors, with significant growth opportunities. But, arguably, the biggest winners in New Zealand from an enabled BTR market would be everyday Kiwis, as this investment and development would raise the renting benchmark.

“While we are starting to see great progress with a small number of pioneering investors and developers delivering quality long-term rental offerings, BTR schemes in New Zealand are not prevalent enough to make a real difference to most who live in the rental market.

“JLL’s Growth Opportunities in Living report highlights the challenges that New Zealand needs to overcome to deliver BTR at scale. It is paramount that we address these roadblocks to avoid the danger of missing the BTR boat in New Zealand altogether.”

Leonie Freeman, Property Council New Zealand Chief Executive, says the Government’s dictating of housing policy, including regulations regarding who can own and operate assets, is making it more difficult for experienced living owners, operators and developers to enter the BTR market.

“The main thing holding us back are the high barriers to entry – barriers that could be easily overcome if the Government was open to tweaking a few policy settings,” says Freeman.

“BTR is already a reality in New Zealand, but it’s potential is limited by needless legislative requirements. The next few weeks represent a crunch-time for BTR in Aotearoa, with the Government due to make an announcement regarding sector support in November.”

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