EMEA Living Investor Survey 2024

E M E A

LIVING INVESTOR SURVEY

2024

CONTENTS

LIVING INVESTOR SURVEY E M E A

2024

01 INTRODUCTION P02

02 Demographically driven demand and greater return stability are key lures for living investors 03 The living segment has quickly grown to make up around 20% of the European real estate universe 04 Portfolio allocations look set to rise across the living sector P05 P07 P11

05

08

P13

P21

Investor interest strongest in Private Rented and Student Accommodation sectors

Only modestly lower interest rates expected despite a slightly weaker European economy in 2024

06

09

P15

P23

UK and German markets should benefit most from recovery in living investment volumes

Prime living capital values to bottom in Q2 2024

07

10 11 P25

P28

P17

SUMMARY

Stabilised stock, joint venture and forward funding are investors’ preferred deal structures in Europe

Sustainability continues to grow in importance for living investors

01

INTRODUCTION

3

4

CUSHMAN & WAKEFIELD

EMEA LIVING INVESTOR SURVEY

INTRODUCTION

This has resulted in the sector swiftly becoming well established with institutional investors. In our view there is significant scope for further growth underpinned primarily by demographic driven demand, lack of supply and societal megatrends. Meeting this growing living demand is also central to overcoming some of the most significant headwinds faced by society at present. THE LIVING SECTOR’S FOOTPRINT IN EMEA REAL ESTATE CIRCLES HAS EXPANDED RAPIDLY OVER THE PAST COUPLE OF DECADES.

High quality research is a critical factor in determining how to meet society’s future living needs. To that end, we are proud to launch our inaugural Cushman & Wakefield EMEA Living Investor Survey. In this research we have asked institutional investors responsible for managing over €1.4 TRILLION in global commercial real estate assets a range of questions in relation to their views on the sector. Through these insights we can obtain a clearer picture of the key opportunities for the segment as well as its challenges and how our industry can rise to meet them.

6

EMEA LIVING INVESTOR SURVEY

DEMOGRAPHICALLY DRIVEN DEMAND AND GREATER RETURN STABILITY ARE KEY ATTRACTIONS FOR LIVING INVESTORS 02

EMEA LIVING SECTOR DEMAND CONTINUES TO BE VERY MUCH LED BY DEMOGRAPHY AND SOCIETAL CHANGE. Rising rates of urbanisation and smaller household sizes over time have amplified the natural demand for housing in the region. In addition, with affordability becoming more stretched and home ownership patterns trending lower, this has led to a significant rise in demand for private rental and affordable housing in recent years. A rising domestic student population and increasing numbers of international students undertaking education in Europe is also supporting the outlook for purpose-built student accommodation (PBSA). Furthermore, the aging of populations will inevitably increase demand within the senior living segment.

The results of our 2024 Living investor survey show that investors are keenly aware of the impact of these changes and how they are influencing real estate demand in the sector. For example, demographics was cited by almost 90% of investors asked to identify the key attractions for investing in the sector. Return stability was also another reason heavily cited by respondents for investing capital into the sector, a plus point borne out in MSCI data which has shown that long term volatility in capital values and rents has tended to be lower for the living sector as compared to other sectors of the commercial real estate market.

THE DEMOGRAPHIC DIVIDEND AND RETURN STABILITY ARE KEY ATTRACTIONS FOR INVESTORS IN THE LIVING SECTOR* 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

INCOME GROWTH & LIQUIDITY STABILITY OF RETURNS POPULATION/DEMOGRAPHIC DIVIDEND Source: Cushman and Wakefield, February 2024 *Percentage of respondents citing the following factors in response to the question 'what are the key attractions of investing in the living sector?' COMPATIBILITY WITH ESG FACTORS INFLATION HEDGE PORTFOLIO DIVERSIFICATION

SUPPLY DEMAND DYNAMICS

8

EMEA LIVING INVESTOR SURVEY

THE LIVING SEGMENT HAS QUICKLY GROWN TO MAKE UP AROUND 20% OF THE EUROPEAN REAL ESTATE UNIVERSE 03

WHETHER THROUGH RISING TRANSACTION VOLUMES OR A GROWING ALLOCATION IN REAL ESTATE INDEXES, IT IS CLEAR THAT THE LIVING SEGMENT IS TAKING A GREATER SHARE OF CAPITAL ALLOCATED TO REAL ESTATE.

When we look at the MSCI universe, a proxy for institutionally held stock, we can see that the proportion of real estate in Europe allocated to living has been increasing since 2014. Living represented a fairly consistent 14% of institutionally held stock in the years up to 2014, and has been slowly increasing, to a peak of 21%.

MSCI UNIVERSE EUROPE

100%

HOTELS

OTHERS

90%

INDUSTRIAL

80%

RETAIL

70%

60%

OFFICE

50%

40%

30%

LIVING

20%

10%

0%

20 01

02 03 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

Source: MSCI, February 2024

9

10

CUSHMAN & WAKEFIELD

EMEA LIVING INVESTOR SURVEY

OVER HALF OF RESPONDENTS ALREADY ALLOCATED OVER 20% OF THEIR PORTFOLIO TO LIVING ASSETS*

INVESTMENT VOLUMES ACROSS EUROPE ALSO ECHO THIS TREND, WITH 22% OF ALL REAL ESTATE INVESTMENT VOLUMES IN EUROPE NOW COMING FROM THE LIVING SECTOR, UP FROM 6% IN 2007.

6% 0-5% PORTFOLIO

2021 marked the peak of the market for living investment volumes, accounting for 32% of all deals in Europe.

12% 5%-10% PORTFOLIO

3% NONE

53% MORE THAN 20%

INVESTMENT VOLUMES BY SECTOR (BN)

14% 10%-15% PORTFOLIO

35%

€ 400

LIVING OFFICE RETAIL INDUSTRIAL

€ 350

30%

12% 15%-20% PORTFOLIO

€ 300

HOTEL OTHER LIVING

25%

Source: Cushman & Wakefield, February 2024 *Responses to the question 'How much of your Real Estate Portfolio (Assets Under Management) is currently allocated to Living assets?'

€ 250

20%

€ 200

15%

€ 150

10%

€ 100

OUR EMEA LIVING SURVEY RESULTS CONFIRMS THESE TRENDS, WITH JUST OVER HALF (53%) OF INVESTORS HAVING MORE THAN 20% OF THEIR EMEA REAL ESTATE PORTFOLIO ALLOCATED TO LIVING.

There are of course smaller players who are yet to build up scale in the living market, and there are also new entrants. In fact, 3% of survey respondents currently have none of their portfolio allocated to living assets, however, these investors plan to invest in the living sector in the next five years.

€ 50

5%

€ 0

0%.

2007

2009

2011

2013

2015

2017

2019

2021

2023

Source: RCA, February 2024

12

EMEA LIVING INVESTOR SURVEY

PORTFOLIO ALLOCATIONS LOOK SET TO RISE ACROSS LIVING SECTOR 04

FURTHERMORE, OUR SURVEY INDICATES THAT THERE IS SCOPE FOR THIS GROWTH TO CONTINUE AS INVESTORS DIVERSIFY THEIR PORTFOLIOS AND AS MORE AND MORE SEGMENTS OF THE LIVING SPACE DEVELOP AND MATURE. Overall, almost 80% of the investors we polled expect the amounts they invest in the living sector to rise over the next five years with 35% indicating that their investment in the sector is set to increase significantly.

When we examine investors’ current portfolio allocations to the living sector versus their target allocations over the next five years, we see a marked pick up in the percentage of investors that are looking to more than 20% of their real estate portfolios to living assets. We believe that this has the potential to translate into average inflows of €70- €85 Billion per annum into the living sector across the EMEA region over the next five years.

PORTFOLIO ALLOCATIONS TO LIVING ASSETS LOOK LIKELY TO RISE IN THE NEXT FIVE YEARS

80

CURRENT LIVING ALLOCATION

70

68%

TARGET LIVING ALLOCATION NEXT 5 YEARS

60

53%

50

40

30

20

15%

12%

12%

12% 12%

10

9%

6%

3%

0%

0%

0

None

0-5%

5%-10% 10%-15% 15%-20% More than 20%

Source: Cushman & Wakefield, February 2024

14

EMEA LIVING INVESTOR SURVEY

INVESTOR INTEREST STRONGEST IN PRIVATE RENTED AND STUDENT ACCOMMODATION SECTORS 05

IN RECENT YEARS EMEA LIVING INVESTMENT VOLUMES HAVE BEEN DOMINATED BY THE PRIVATE RENTAL (PRS) AND PURPOSE-BUILT STUDENT ACCOMMODATION SEGMENTS. This finding is validated in our survey data with almost all respondents indicating that they are currently invested in the PRS segment while over half also indicated they were invested in the student accommodation segment.

When we examine the segments investors are currently invested in versus those they are targeting in the next three years it is clear that investors are keen to diversify within the living space. The student accommodation segment certainly appears set to benefit from increased investor interest but segments like social and affordable housing, co-living and senior living also appear increasingly on investors’ medium-term radars.

INTEREST ACROSS LIVING SEGMENTS IS BROAD WITH PRS AND STUDENT ACCOMMODATION SEGMENTS MORE POPULAR*

100

CURRENT LIVING ALLOCATION

90

TARGETED IN NEXT 1-3 YEARS

80

70

60

50

40

30

20

10

0

PRIVATE RENTAL

PURPOSE BUILT STUDENT

SOCIAL/ AFFORDABLE

CO-LIVING SENIOR LIVING

Source: Cushman and Wakefield, February 2024 *Percentage of respondents citing the following segments in response to the question 'which segments of the living sector are you currently invested in and which segments are you targeting in next 1-3 years?'

16

EMEA LIVING INVESTOR SURVEY

UK AND GERMAN MARKETS SHOULD BENEFIT MOST FROM RECOVERY IN LIVING INVESTMENT VOLUMES 06

EMEA LIVING INVESTORS APPEAR MOST FOCUSED ON THE UK AND GERMANY IN PARTICULAR WHICH IS TO BE EXPECTED SOMEWHAT GIVEN THE GREATER PROPENSITY FOR HOUSEHOLDS TO LIVE IN PRIVATELY RENTED ACCOMMODATION.

Beyond these two key markets investors’ geographic preferences still appear to remain biased towards core European economies with Spain and France also ranking highly. However, there also appears to be interest in locations outside Europe’s core with Ireland and the Nordics registering as potential locations for investors deploying capital.

PREFERRED GEOGRAPHIC MARKETS

1. UK 2. GERMANY 3. SPAIN

4. IRELAND 5. FRANCE 6. NORDICS

18

EMEA LIVING INVESTOR SURVEY

STABILISED STOCK, JOINT VENTURE AND FORWARD FUNDING ARE INVESTORS’ PREFERRED DEAL STRUCTURES IN EUROPE 07

BASED ON OUR SURVEY RESPONSES, STABILISED STOCK IS ONE OF THE MOST POPULAR ROUTES TO MARKET WITH 26% OF INVESTORS VOTING IT AS THEIR PREFERRED DEAL STRUCTURE. Purchasing stabilised stock is low risk as investors can analyse the assets performance before they purchase it. It is also the quickest way to own an income producing assets and scale can be achieved if a portfolio comes to market. That being said, opportunities vary greatly by living subsector and geography.

Joint venture is also a preferred deal structure - voted for by 26% of investors - as partnering with an experienced developer gives investors the opportunity to link the deal to asset performance or exit pricing, allowing shared risk and upside.

WHAT IS THE MOST LIKELY DEAL STRUCTURE YOU ENVISAGE USING OVER THE NEXT 1-3 YEARS?

26% JOINT VENTURE

6% REPOSITIONING

18% FORWARD COMMITMENT/PURCHASE

24% FORWARD FUNDING

26% STABILISED STOCK

Source: Cushman & Wakefield, February 2024

19

20

CUSHMAN & WAKEFIELD

EMEA LIVING INVESTOR SURVEY

18% OF INVESTORS SAID FORWARD COMMIT/PURCHASE WAS THE MOSTLY LIKELY DEAL STRUCTURE THEY ENVISAGE USING OVER THE NEXT THREE YEARS.

Forward funding also scored highly amongst investors, with 24% of votes. Investors are attracted to its risk profile and the opportunity to build scale quickly. Forward funding also allows investors to have more control of the product and the delivery of the asset. However, in the last year or so viability has challenged the forward funding market. As the cost of debt and construction inflation eases over the next year or two, we expect the forward funding market to pick up.

Forward commit allows investors to build scale quickly, with only a down payment needed when the deal is agreed and the rest of the payment isn’t due until practical completion. However, a forward commit purchase is likely to be less favourable as it doesn’t allow the investor much control over the development of the asset.

Repositioning was the least popular route with only 6% of investors selecting it as their most likely deal structure. This is surprising given the opportunities which are arising in the living sector in response to the surplus office space which is forecast in the coming decade. However, investor sentiment clearly reflects the sluggish take up of real estate repositioning, due to the unpredictable macro landscape, uncertainties surrounding future office demand, the viability challenges discussed earlier, and regulatory and architectural obstacles.

22

EMEA LIVING INVESTOR SURVEY

ONLY MODESTLY LOWER INTEREST RATES EXPECTED DESPITE A SLIGHTLY WEAKER EUROPEAN ECONOMY IN 2024 08

PERHAPS NOT SURPRISINGLY, THE MAJORITY OF INVESTORS WE SURVEYED SAW THE ECONOMIC PICTURE REMAINING SLUGGISH IN 2024 WITH 60% OF THEM SAYING THEY EXPECTED THE MAIN EUROPEAN ECONOMIES TO WEAKEN SLIGHTLY THIS YEAR. This is broadly in line with our EMEA house view for the UK and Euro area economies this year where we see economic growth rates remaining subdued with the risk of a shallow recession.

However, despite a somewhat gloomy investor outlook for growth in 2024 this doesn’t translate into much by way of optimism around how much interest rates could be cut in 2024. Overall, we found that 62% of respondents expected interest rates to fall by only up to 50 basis points with only 26% anticipating a more aggressive rate cut scenario (rates cut by 100-150 basis points).

HOW DO YOU THINK INTEREST RATES ARE MOST LIKELY TO CHANGE IN THE NEXT TWELVE MONTHS?

12% NO CHANGE

62% DECREASE BY 0% TO 0.5%

26% DECREASE BY 0.5% TO 1.5%

Source: Cushman & Wakefield, February 2024

24

EMEA LIVING INVESTOR SURVEY

AS REGARDS THE IMPACT OF CENTRAL BANKS’ MONETARY TIGHTENING ON LIVING SECTOR ASSET PRICING, THE MAJORITY OF OUR SURVEY RESPONDENTS BELIEVED THAT IT HAD A RELATIVELY MODEST IMPACT. 53% of investors we surveyed believe that prime living yields rose by 50-100 basis points in response to the actions of the Bank of England and ECB although a further 29% pointed to repricing of 100 150 basis points. Entering 2024 the question of when commercial real estate capital values might stabilise is perhaps the one on most investors’ lips.

In our recent EMEA 2024 Outlook we outlined our house view that prime capital values may begin to stabilise in the first half of 2024 although clearly sector, location and asset quality characteristics mean that there could be some variation in timing around when precisely values bottom. When we asked investors for their views on when prime living markets were likely to bottom, we found them broadly in agreement with our thoughts on the stabilisation of the market with 56% of respondents indicating that capital values would stabilise by Q2 2024 and a further 29% seeing a bottom occur in Q3 2024.

PRIME LIVING CAPITAL VALUES TO BOTTOM IN Q2 2024 09

WHEN DO YOU EXPECT PRIME CAPITAL VALUES IN THE LIVING SECTOR TO BOTTOM?

12% Q4 2024

3% 2025

12% Q1 2024

44% Q2 2024

29% Q3 2024

Source: Cushman & Wakefield, February 2024

26

EMEA LIVING INVESTOR SURVEY

SUSTAINABILITY CONTINUES TO GROW IN IMPORTANCE FOR LIVING INVESTORS 10

AS WITH OTHER SECTORS IN THE COMMERCIAL REAL ESTATE MARKET, SUSTAINABILITY FACTORS ARE BECOMING MORE AND MORE IMPORTANT FOR INVESTORS IN THE LIVING SEGMENT, AND THIS IS CLEAR FROM OUR SURVEY RESPONSES.

Nearly 80% of the investors we polled saw sustainability as a key objective of their living portfolios while from a pricing perspective over 70% of investors said they were willing to pay a premium for living assets with strong sustainability characteristics. Our results also indicated that sustainability factors were important for tenants with almost two in three responses saying they represented a key consideration.

SUSTAINABILITY IS CLEARLY IMPORTANT FOR LIVING INVESTORS

80%

I AM WILLING TO PAY A PREMIUM LIVING ASSETS WITH STONG SUSTAINABILITY CHARACTERISTICS SUSTAINABILITY FACTORS ARE KEY CONSIDERATION FOR TENANTS OR OCCUPIERS SUSTAINABILITY IS A KEY INVESTMENT OBJECTIVE OF MY LIVING PORTFOLIO

70%

60%

50%

40%

30%

70%

20%

10%

0%

Strongly Agree

Agree

Neutral

Disagree Strongly Disagree

Source: Cushman & Wakefield, February 2024

11

SUMMARY

29

30

CUSHMAN & WAKEFIELD

EMEA LIVING INVESTOR SURVEY

SUMMARY

Although the near-term economic picture is expected to remain muted, investors expect to see interest rates across Europe to come down this year and support a recovery in capital values beginning in the second half of 2024. AS WE LEAVE BEHIND A DIFFICULT 2023 FOR THE LIVING SECTOR, IT IS HEARTENING TO SEE OUR INAUGURAL 2024 EMEA LIVING INVESTOR SURVEY REFLECT SOME GREEN SHOOTS OF OPTIMISM.

From a structural perspective it is clear that investors recognise the strong growth potential for the sector. While the private rental and student accommodation segments remain the most active segments currently, investor interest continues to broaden into segments like social/ affordable housing and senior and co-living which we expect to grow and mature over the medium term. Investor allocations too are set to rise and we believe that annual inflows into the living sector across EMEA could grow to £70-85 Billion per annum over the next five years, reinforcing the sector’s place in the real estate universe. We are confident that this recovery in investment volumes will commence in 2024, helped by improved pricing alignment between buyers and sellers and a more favourable interest rate outlook across Europe.

LIVING INVESTOR SURVEY E M E A

2024

CONTACTS

TOM MCCABE Head of Living Research & Insights, EMEA tom.mccabe@cushwake.com

ALEXANDRA PAULIN Head of Residential and Healthcare, French Capital Markets alexandra.paulin@cushwake.com

STEPHEN SCREENE Head of Living Capital Markets, EMEA stephen.screene@cushwake.com

MILLIE HARPER

MARK CLEGG Head of Residential Investment, UK mark.a.clegg@cushwake.com

GEOFF MCCABE

Head of Living Research, UK millie.harper@cushwake.com

Living Capital Markets, Spain geoff.mcCabe@cushwake.com

PATRICK HOGAN Head of Residential Capital Markets, Ireland patrick.hogan@cushwake.com

ANDREW SMITH Head of PBSA, UK andrew.t.smith@cushwake.com

LUCA D’ANZIERI Living Capital Markets, Italy luca.danzieri@eur.cushwake.com

JOEP VAN DE VORSTENBOSCH Head of Living, EMEA joep.vandevorstenbosch@cushwake.com

JAN BASTIAN KNOD Head of Living Capital Markets, Germany jan-bastian.knod@cushwake.com

ABOUT CUSHMAN & WAKEFIELD

Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more.

For additional information, visit www.cushmanwakefield.com.