Investors in Europe Focus on Build-to-Rent, Student Accommodation

By Matthew Bailey, Senior Vice President, Loan Asset Management  

In the first quarter of 2025, we expressed some reservations concerning the rising optimism in the European real estate debt market but pointed out a few potential bright spots. How did our predictions fare?  

Build-to-Rent 

In our last review we pointed to the UK build-to-rent (BTR) market as a prospective investor focus for 2025. Sure enough, this market saw investment top £800m in 1Q 2025, the highest level for the first quarter since 2022, according to Savills. Big domestic and international investors continue to support the sector, with L&G and Nomura announcing setting up a joint venture to deliver 1,000 units across the UK, Barings agreeing a forward-funded deal with Glenbrook for over 600 apartments in Leeds and CompassRock acquiring 295 apartments in Bristol, all creating opportunities for lenders.  

Purpose-Built Student Accommodation 

Our second pick was European purpose-built student accommodation (PBSA). Polling by both Savills and Cushman suggest this is the most in-demand sector of all, with both brokers finding that around 70% of respondents plan to increase their exposure in the short to medium term. In the UK PBSA investment was down slightly on 1Q 2024, but major transactions still closed, including Greystar’s acquisition of 400 beds in Cardiff and Exeter and M&G’s forward funding of N16 Stratford in London 

More should follow. All the fundamentals are in place: rental growth is robust, there remain deep supply and demand imbalances across the continent, and the number of international students coming to Europe continues to rise – a trend likely to continue if, for example, such students came to see the U.S. as a less attractive destination, given current events.  

As for European data centre investment, CBRE reports that new supply in Europe’s primary markets (London, Frankfurt, Paris, Dublin and Amsterdam) fell by around a quarter in 1Q 2024 compared with a year earlier, but this simply reflects a shortage of power sources and appropriate sites. Strong developments in secondary markets (notably Madrid, Milan, Warsaw and Zurich) and record forecast take-up across the continent for the rest of the year suggest that 2025 will still offer plentiful opportunities.  

Logistics 

The logistics sector has cooled: In April, the European Union exports to the U.S. fell by 33% to US $55.2 billion, and industrial production fell 2.4% across the 20-member eurozone, according to Eurostat. That was a sharper decline than anticipated and the swiftest fall in production in more than two years. The Trump administration's tariff proposals, aimed at curbing a widening trade deficit, have sparked uncertainty in world trade and seem to have given both consumer and investor confidence a knock. European investment is down almost 40% on both 4Q 2024 and the five-year 1Q average, according to some reports. However, there are those who think the impact on supply chain strategy – think stockpiling – may still be positive for the sector in the longer term.  

Offices 

Offices were a notable absence from our last review, largely because we were taught long ago that if you have nothing nice to say, it’s best to say nothing at all. But Savills now reports that European office yields and vacancy rates have stabilised after several years of flux, bank LTVs are edging up from 50% towards 60% and investor demand is there for prime, core and core-plus assets especially in the €30 million to €60 million range. Meanwhile, we hear talk of new and bigger deals finally coming in London, all in the £100m+ range – funding for new developments, refinancings of completed developments and acquisitions – so it’s another space to watch. 

Securitizations 

Finally, in our last quarterly report we were pleased and surprised to note that two European CMBS deals had just been announced. As it turned out, a total of six deals closed in the first quarter, with a variety of asset classes across multiple jurisdictions and total issuance of around €3.3 billion – 50% more than the whole of 2024. Wonders never cease.  

Will the flow of good news continue? Or will it be upended by more surprises from the White House? Is European CMBS a thing again, or is this a flash in the pan? And will retail ever recover? Keep an eye out for the next installment. 

For more information on outsourcing services in Europe, contact Lisa Williams at lisawilliams@situsamc.com, or visit our website. Download our white paper, “Unlocking Potential in Europe: 5 Advantages of Outsourcing Commercial Loan Servicing, Asset Management and Valuation Management,” here.