Strategising for success in the next phase of modern living
07 / 11 / 25 - 8 minute read
For more than 40 years, the residential real estate sector has been PATRIZIA’s bread and butter. The company has been generating returns for clients in residential since 1984. In living value add, PATRIZIA has achieved 19% gross IRR on all its investments. The company has been recognised and built up its track record in the sector, winning many accolades along the way, including being named ‘the leading independent, residential real estate investment manager in Europe’ by IPE in 2023.
Since 1984, PATRIZIA has had to realign its approach and find the best solutions to adapt to market changes in order to maintain its leading standing in the sector, bolstering its resources and expertise along the way. Today, more than 200 residential professionals manage a portfolio worth EUR 16 billion in residential, rising to EUR 19 billion when the wider living sector is taken into account.
And it’s in acknowledging the wider living sector, including care and hotel, that points the way in addressing modern living considerations – with the living transition one of the four megatrends PATRIZIA is focused on with its long-term investment lens.
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Broad-brush approach a relic of the past
Broad-brush approaches to the living sector focused on traditional multi-family housing no longer work. Instead, city fundamentals, local nuances and asset characteristics are becoming the decisive factors for future returns in the sector.
This is one of main takeaways from PATRIZIA’s latest PATRIZIA INSIGHT European Residential Markets report published in September 2025. This flagship research report from the company has been produced annually for more than 10 years and provides an opportunity to scan the living sector and produce useful analysis for investors and interested parties alike.
While retaining ‘residential’ in its title, PATRIZIA’s research extends to the wider living sector, which remains the largest part of PATRIZIA’s business and the largest sector in real estate investing. And the living sector is forecast to play an even larger role with USD 1.4 trillion in transactions inflow globally expected over the next five years. In the same timeframe, its market share from a sectoral perspective is predicted to grow to one-third of the overall bucket in Europe – up from 26% in 2024 and 17% in 2014.
City focus crucial
Insights from PATRIZIA’s Investment Strategy & Data Intelligence team (who authored the report) are therefore critical in shaping strategies for success in living. Understanding the ‘rules of the game’ is the driving factor behind the annual PATRIZIA INSIGHT European Residential Markets report. And a more nuanced, city-specific picture has emerged.
Overall, residential markets have returned to growth but there is a sizeable gap between the top quartile cities which saw prime capital value growth of 13% year-on-year while the lower quartile managed just 3% growth. Investment strategies must therefore address the picture in different cities rather than set a path nationally or at pan-European level.
The broader geographical focus which could be applied to residential strategies in the past has narrowed to a city-based approach and the residential bond-yield gap – once a reliable benchmark – is no longer the indicator it used to be, with the link weakening since 2020 and the quantitative easing (QE) residential-bond-yield gap being history.
“The old macro playbook has lost its predictive power so investors need a new investment compass.”
Dr Marcus Cieleback – PATRIZIA Chief Urban Economist -
The authors of the research:
PD Dr Marcelo Cajias, Head of Investment Strategy & Data Intelligence
Dr Marcus Cieleback, Chief Urban Economist
Georg Kläger, Associate Director – Investment Strategy
Making sense of a changed living sector
- Marcus worked with PATRIZIA Head of Investment Strategy & Data Intelligence PD Dr Marcelo Cajias and PATRIZIA Associate Director – Investment Strategy Georg Kläger on the report, citing the five new structural forces shaping the future of the European living sector:
- 1. Urbanisation and demographics;
- 2. Affordability challenges;
- 3. Demand and supply imbalances;
- 4. Construction and financing; and
- 5. The regulatory environment.
- To make sense of these structural forces, the company has four accompanying focuses:
- 1. Understanding affordability;
- 2. Evaluating energy efficiency;
- 3. Analysing spatial dynamics; and
- 4. Assessing emerging sectors.
- And this then translates into four central investment opportunities in the sector:
- 1. Providing affordable housing;
- 2. Brown-to-green value-add strategies;
- 3. Strategies benefiting from gentrification/city-centric improvements; and
- 4. Single family housing, flexible living-focused strategies.
PATRIZIA’s tool for city analysis
All of this is driving a need to identify the cities with favourable demographic and economic profiles. And to help do just this the company has created the PATRIZIA City Ranking, which underlines how urban fundamentals across 142 cities drive investment attractiveness. The ranking measures 28 variables aligned with market fundamentals, location quality, innovation and connectivity to generate scores for each of the cities which are then grouped into an overall table.
Supporting residential city location investment attractiveness, as well as location analysis for other real estate sectors, the Ranking is a valuable resource when assessing where to allocate living investment capital.
Marcus adds: “Our PATRIZIA City Ranking shows that success depends on selecting cities with the right demographic and economic profile, because size alone is no guarantee for liquidity or long-term growth.”
PD Dr Marcelo Cajias – PATRIZIA Head of Investment Strategy & Data Intelligence – is clear on how to achieve success in the living sector, saying: “We are entering a more granular and diverse investment environment. To succeed, investors must focus on stable income streams, diversify across city districts as well as geographies, and embrace new living segments that are reaching institutional scale. These are the building blocks of long-term outperformance.”
The new face of modern living and PATRIZIA examples
A long, but not exhaustive, list of living segments in this growing, more diverse sector includes student housing, purpose-built student accommodation (PBSA), micro-living, co-living, large scale purpose-built shared living, serviced apartments, private rented sector (PRS), multi-family housing (MFH), build-to-rent (BTR), build-to-let (BTL), shared ownership, single-family rental (SFR), senior living, hotel, healthcare, affordable housing and social housing.
Take a look below to learn more about PATRIZIA’s approach and allocation to some of these segments and housing types.
PBSA
PATRIZIA is introducing a pan-European living value-add strategy, which aims to create a portfolio of student assets across several European cities. The countries in focus include the UK, Germany and Italy.
PATRIZIA Head of Investment Management Living Antonio Marin-Bataller says: “We are in discussion with developers to create joint ventures with best-in-class portfolios. Student housing plays an important role in this value-add strategy. PBSA is an attractive and key part of PATRIZIA’s living sector strategy.”
To guide PATRIZIA’s PBSA investment activity, the IS&DI team has developed a Student City Index, which analyses more than 180 cities across Europe to guide institutional investment into PBSA.
Dr Marcus Cieleback, Chief Urban Economist at PATRIZIA, comments: “Institutional investors need more than macro-level guidance because PBSA performance is shaped by highly localised factors. Our Index gives them a reliable framework to identify not just where the student population is growing, but where the conditions for sustainable investment returns are most favourable.”
Antonio Marin-Bataller, Head of Investment Management Living
Assets in focus:
Two PBSA assets in central Barcelona
Units: 635
Key fact:
PATRIZIA was already able to push up the asset’s rents by over 30% from the level set by the previous owner, as well as increase annual occupancy from 81% to 93%.
Affordable housing
PATRIZIA’s Sustainable Communities impact investing strategy is dedicated to tackling housing shortages and social inequality through impact-driven real estate investment.
So far, the strategy has invested in Ireland, the UK, Belgium and Spain, with an overarching aim to house 7,500 people in affordable and social homes across major metropolitan areas in Western Europe.
PATRIZIA Sustainable Communities Fund Manager Marleen Bekkers says: “The need for affordable housing and greening buildings is big, and so is the investment opportunity. There are many possibilities for us to acquire or find distressed positions and execute our business plans. We are adding value from not only a financial perspective and an environmental perspective, but also from a community and neighbourhood perspective.”
Marleen Bekkers, PATRIZIA Sustainable Communities Fund Manager
Assets in focus:
Three residential developments in Dublin
Units: 907
Key fact: The homes are being built to the highest environmental and quality standards, with all units achieving EPC A ratings and Home Performance Index (HPI) certification, ensuring energy efficiency, comfort and long-term affordability for more than 1,900 residents.
Healthcare
The healthcare sector provides strong opportunities which can be incorporated into a diversified investment portfolio. PATRIZIA’s healthcare investment activity is mainly concentrated in Germany, led by a specialist operated properties team.
PATRIZIA Head of Investment Management Operated Properties Thomas Otto comments: “We want to remain active in this segment. Despite the challenges we continue to see in the inpatient care sector, such as staff shortages, refinancing, rising costs and much more, we believe in this important sector. We have been observing for some time now an increasing number of locations where outpatient structures such as care communities or assisted living, as well as day care, have been added to the inpatient care offerings. This works very well, not least in combination with the different segments within one building and is also very interesting for us as an investor.”
Thomas Otto, Head of Investment Management Operated Properties
Asset in focus:
Nursing home, Dresden
Units:
131, plus 26 traditional residential units
Key fact: The care units have been leased to Vitanas – one of the most experienced operators in the German market.
Large-scale purpose-built shared living
This segment is rather unique and harder to build up into a portfolio, being represented instead by individual assets. One such example in PATRIZIA’s portfolio is the Havelufer Quarter in Berlin.
PATRIZIA Head of Investment Management Living DACH Torsten Bergner says: “The Havelufer Quarter includes a wide mix of living types. We have build-to-rent, micro-living, family apartments and units for senior living. It’s not just housing. It’s a mixture of living, working and leisure which is very well designed with a good balance of different use types. But the main focus is on living, with additional features on top.”
Torsten Bergner, Head of Investment Management Living DACH
Asset in focus:
Havelufer Quarter, Berlin
Units: 1,700
Key fact: Among the additional amenities included for residents at the Havelufer Quarter are a kindergarten, co-working spaces and a yoga room, with the neighbourhood designed as a car-free zone with these amenities all within walking/cycling distance.
BTR
When macroeconomic conditions have been conducive to new developments, BTR has proven a popular avenue, reflecting a trend towards renting over home ownership which has accelerated in recent years, with the number of rental households globally rising by 10% over the past decade.
PATRIZIA Head of Investment Management Living Antonio Marin-Bataller comments: “When investing in BTR schemes, the conditions have to be right. We take a strong interest in local amenities, income levels in the area and gaps in supply when assessing opportunities. With all aspects falling into place, BTR schemes can be a powerful driver of value and returns for our investors.”
Asset in focus:
Corkfield, Edgbaston (UK)
Units: 375
Key fact: The scheme is at the centre of an area comprising a cricket ground, the main university, one of the UK’s most prestigious hospitals and Birmingham’s largest public park, making the location a very desirable one.
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