European Living Sector Outlook 2024

DEMAND FUELLED BY SECULAR

RATHER THAN CYCLICAL FACTORS

As mentioned earlier, we anticipate a gradual easing of monetary policy by both the European Central Bank and the Bank of England in Q3 2024, offering some relief. Additionally, forecasts indicate a decrease in construction cost inflation next year. Hence, there are grounds for cautious optimism that 2024 could mark a turning point from a viability standpoint.

Although there is unquestionable strength in demand, the living sector has not been immune to the challenging cyclical conditions that have affected various commercial real estate sectors in the past year. Escalating finance and construction costs over the last two years have exerted a negative influence on a living sector that was already grappling with inadequate supply and, arguably, facing an even more pressing need for output relative to other sectors. Additionally, increasing regulations, while well intentioned, are contributing to the growing burden of construction costs.

As we approach the end of 2023, the fundamentals of the EMEA living sector continue to be shaped by non-cyclical factors. In segments like senior living, the consistent aging of our population, coupled with rising life expectancy, serves as the primary catalyst for long-term demand. Conversely, in sectors such as privately rented and student accommodation, recent supply has failed to keep pace with robust demand, driven by trends like increased urbanization, declining

homeownership rates, and a rise in student numbers (both domestically and internationally). Consequently, a widening gap between demand and supply has led to an escalation in rent inflation in the post-COVID era.

PROJECTED POPULATIONS OVER 75YRS OF AGE (MILLIONS)

EUROPEAN CONSTRUCTION INFLATION FORECASTS*

14%

70

9.5

12%

9.0

65

10%

8.5

EU

60

8%

8.0

55

6%

7.5

50

4%

7.0

UK

45

2%

6.5

0%

2022

2023

2024

12.7%

6.5%

4.1%

6.0

40

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

Source: Turner and Townsend International Construction Market Survey 2023, *Average inflation rates across 15 European cities

Source: OECD, November 2023

4 LIVING OUTLOOK 2024

THE TIDE IS TURNING DEMOGRAPHIC | 5