The growing demand for rental housing across Europe means an extra 3.6m rental homes are needed over the next decade, reflecting a €1.4tn (£1.2tn) investment opportunity for institutional capital, according to JLL.
A recent report by the company, European Living Capital Markets Growth & Opportunity, found that urbanisation, immigration and affordability, among other long-term structural trends, have made the private rental sector the fastest-growing form of tenure in the region.
The UK and EU rental sector has grown by 14% over the past decade. This compares with a 5% increase in home ownership and a 1% decline in social housing.
Over the next decade, JLL forecasts the UK/EU PRS will grow to at least 56.6m homes, with private renting rising to account for 24% of households.
According to JLL, institutionally owned private rental stock forms the minority in the overall housing supply of Europe. The sector currently has 5.3m institution-owned homes, which make up 10% of the UK/EU PRS sector.
When including purpose-built student housing, later living/care homes and co-living, this rises to 7.4m homes owned by institutional capital, versus some 47.7m private rental homes outside the sector, largely owned by small private landlords.
The share of the private rental sector that is owned by institutions is slowly growing. In 2023, there were an estimated 200,000 new institution-owned rental homes, which equates to just 30% of the annual demand.
To reach a maturity level of 40% market share would require 15.9m additional homes, or 17.4m including the predicted future demand over the next 10 years, reflecting a €7.2tn investment opportunity at current capital values.
Gemma Kendall, head of multi-family investment, international capital markets EMEA at JLL, said: “European demand for private rental homes is soaring, and institutions are primed to play a pivotal role in this dynamic market. As urbanisation and demographic shifts reshape housing needs across Europe, we are seeing a unique combination of long-term demand drivers and increasing investor interest that suggests a significant growth trajectory ahead.”
Emma Rosser, living research director, EMEA at JLL, added: “There is already an obvious shortage of quality rental housing in Europe. With millions more in need of accommodation in key markets, without significant investment this undersupply will worsen.
“Institutions will be essential to unlocking housing at scale. Professional investors today account for a small portion of the living landscape, but this will change as growing markets continue to attract capital for new purpose-built products.”
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