The COVID-19 pandemic is rapidly changing the property landscape across the world as cities are re-imagined. According to JLL’s latest European City Dynamics report, COVID-19 has altered many aspects in the lives of young Europeans influencing how this group will navigate higher education, their entry into the labour force and ultimately their associated housing needs. These shifts present new opportunities and challenges for Living real estate investors, operators and developers.
Young urban residents will continue to impact real estate dynamics and the demand for city dwellings in the post-pandemic world. Across all wider urban metropolises, about 22% of the cities’ populations are aged 20-34, compared to 18% for the rest of the wider metro area. In addition to being the most mobile, young people are also the most populous tenant group in the multifamily sector and those that are most likely to live alone, pointing to their importance for most cities’ rental housing markets. With over 40% of the continents’ 20-year-olds enrolled in higher education, they are also the main residents in student accommodation. Across 14 major European countries, 25% of students under the age of 22 live in student accommodation.
As the group least likely to have avoided the economic impacts of the pandemic, young city dwellers are facing growing employment uncertainty, housing affordability challenges and reduced mobility. These pressures are having a notable impact on how real estate is and will be consumed in cities going forward, pointing to the likelihood that more young adults will continue renting and delay getting onto the housing ladder. Multifamily is expected to continue its resilient income performance with strong occupancy and stable rent collection rates. In the UK, JLL’s survey of institutional owners found that rent collection has not fallen below 96% this year, in line with normal levels.
With job markets for school and university leavers looking increasingly uncertain, more students may consider staying longer in tertiary education. The average time spent in higher education across Europe rose from just under 3 years following the Global Financial Crisis to 3.2 years by 2011 – faster than the longer-term growth trajectory. A similar growth could happen now, driving demand for student accommodation.
Jeremy Eddy, Head of Living and Hospitality Capital Markets, EMEA, JLL, said: “With differentiated effects of the pandemic across markets and sub-markets, understanding local differences and city-specific influences is essential to unpick the challenges and opportunities for Living real estate investors, operators and developers moving forward into the ‘new normal’. Cities across the continent have important young adult markets and their changing housing preferences will be crucial for real estate dynamics. With national lockdowns and travel restrictions impacting the cross-border flow of people, the most likely change in the short-term will be a greater focus on domestic demand for student housing and private rental units, though mobile individuals will be a core element of demand in the longer-term. In the UK, domestic student acceptances of university places were up 4% year-on-year - an encouraging sign for purpose-built student accommodation demand.”
Tom Colthorpe, Senior Analyst – EMEA Living Research & Strategy, JLL and author of the report, commented: “The far-reaching nature of the current crisis will deeply influence the lifestyles and financial decisions of young people over the coming years. Living investment and operational strategies need to have renewed awareness of the changing location preferences of rental units as well as tenants’ expectations of optimal scheme designs. Understanding the demands of young residents on what they want from their home is likely to translate into increased lettings and purchases for properties that respond to these preferences.”