Investment in alternatives increases in Europe

A study from Savills shows that allocations into alternative real estate assets have increased by approximately 25 percent year-on-year over the past 15 years.

A study from Savills shows that allocations into alternative real estate assets have increased by approximately 25 percent year-on-year over the past 15 years.

Savills says that the major driver of this demand is the potential higher return generated by niche categories. Sectors such as student accommodation, senior housing, healthcare/clinics and leisure have lower transaction volumes, less liquidity, lower transparency and are often counter-cyclical.

Therefore, they can offer average prime yields of 6 percent in the UK, much higher than the average of 4.6 percent for traditional prime commercial property assets.

Other drivers include long-term demographic trends in Europe, such as ageing populations and growing volumes of international students and tourists.

The report also indicates that the UK had the highest volume of activity in 2015, accounting for almost 50 percent of total European alternative asset investment activity (excluding hotels and multifamily), followed by Germany with 25 percent and Sweden with 13 percent.

The most popular type of alternative asset in 2015 were mixed-use buildings, typically consisting of  residential or office buildings with commercial ground floors or commercial parks including workshop and production space, which accounted for almost a third of alternative transactions.

Eri Mitsostergiou, director of Savills European research, predicts that the strongest activity in future will be in the residential, healthcare and student accommodation markets in the UK, Germany, France, the Netherlands, the Nordics and Spain.

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