The living assets thesis is rewriting Europe's institutional real estate playbook

A single sector now dominates European real estate capital allocation

For decades, offices and retail anchored institutional portfolios across Europe. That era is over. Investment into European real estate climbed to €241 billion in 2025, and the living sector accounted for the greatest share of investment activity at €53 billion, up 9% year-on-year, according to CBRE. The figure confirms a structural rebalancing that has been building since the pandemic but has now reached a decisive threshold: living assets, encompassing residential, student accommodation, senior housing, and co-living, are the continent's dominant real estate allocation.

This is more than a cyclical rotation. The convergence of demographic pressure, chronic housing undersupply, and favourable risk-adjusted returns has turned the living sector into the gravitational centre of European real estate strategy. Savills forecasts that European real estate investment volumes will rise by around 18% in 2026, with the living sectors expected to remain a dominant allocation for institutional capital. For investors, allocators, and policymakers, the implications are profound.

Why are institutional investors treating living assets as a unified allocation strategy?

The traditional approach to residential real estate treated multifamily, student beds, and senior care as separate, often peripheral, allocations within diversified portfolios. What has changed is the recognition that these sub-sectors share a common investment thesis rooted in structural demand, operational intensity, and demographic resilience.

Europe faces a housing deficit that no plausible level of new construction can resolve within a single investment cycle. Urbanisation continues to concentrate population growth in cities where planning constraints and construction costs limit supply responses. Student accommodation markets in university cities from Lisbon to Munich operate at persistent occupancy rates that conventional commercial assets cannot match. Senior housing demand is propelled by the continent's ageing population, a trend that is accelerating rather than stabilising.

The result is a structural supply-demand imbalance that, according to CBRE, will sustain rent growth across living sectors despite increased development activity. This imbalance provides the countercyclical stability that institutional capital prizes, particularly in a period of macroeconomic uncertainty and elevated interest rates.

Maud Wargny, Senior Director of Investments for Europe at Ivanhoé Cambridge (CDPQ), has emphasised the resilience of operational and logistics sectors as strategic priorities for long-term European growth, as reported by IPE Real Assets. Her perspective reflects a broader institutional consensus: living assets reward operators and capital partners who understand tenancy dynamics, regulatory frameworks, and demographic trajectories across multiple European jurisdictions.

The unification of these sub-sectors under a single "living" allocation label signals a maturing market. Investors are building dedicated platforms, hiring specialised asset management teams, and structuring vehicles that can deploy across residential rental, purpose-built student accommodation (PBSA), and senior living within a single fund mandate. The operational expertise required to manage these assets, from lease-up velocity to resident services, differentiates living assets from passive commercial holdings and creates barriers to entry that protect early movers.

How is public policy reshaping private capital flows into European housing?

The living assets thesis cannot be analysed in isolation from the regulatory environment. Across Europe, governments are intervening in housing markets with increasing ambition, creating both constraints and opportunities for institutional investors.

Portugal offers a compelling case study. Law 56/2023, known as "Mais Habitação," enacted in October 2023, eliminated the real estate investment route for the Golden Visa programme, suspended new short-term rental licences in certain areas, and introduced tax incentives to convert short-term rentals into long-term affordable housing. The legislation represents one of Europe's most comprehensive attempts to redirect private capital toward meeting housing need rather than speculative demand.

Pedro Baganha, Porto's City Councillor for Urbanism, Public Space and Housing, has announced an ambition to increase public housing supply from 2% to 10% over the next six years, according to Iberian Property. This target, if achieved, would represent a transformative expansion of the social housing stock and would inevitably reshape the operating environment for institutional residential investors in the city.

The Portuguese experience illustrates a dynamic visible across the continent. Governments are no longer passive observers of housing markets. Rent regulation in Berlin, licensing reforms in Amsterdam, inclusionary zoning requirements in Paris, and affordable housing mandates in Dublin all reflect a policy landscape where institutional capital must navigate regulatory complexity as a core competency.

For sophisticated investors, regulation is a source of competitive advantage rather than a deterrent. Operators who can structure compliant, affordable, and professionally managed housing products gain access to favourable planning permissions, tax incentives, and long-term public-sector partnerships. Those who treat regulation as an obstacle risk being excluded from the most attractive pipeline opportunities.

Sonia Da Silva, Directrice Générale Adjointe en charge du développement tertiaire et des utilisateurs at Bouygues Immobilier, represents the type of development leadership shaping how institutional-grade housing is conceived, financed, and delivered across European markets. The integration of development expertise with operational asset management capability is becoming a prerequisite for successful living sector investment.

What role does cross-border capital play in scaling the living sector?

The living assets thesis is fundamentally a cross-border story. European housing markets are local in their regulatory and demand characteristics but increasingly global in their capital sourcing. Middle Eastern sovereign wealth, North American pension capital, and Asian family office allocations are all flowing into European living assets, attracted by yield spreads over domestic alternatives and the structural demand narrative.

Divya Dattani, Senior Vice President at Abu Dhabi Global Market (ADGM), focuses on financial regulation and strategic partnerships that intersect with global real estate capital flows. Her work at the nexus of regulatory frameworks and investment facilitation reflects the growing importance of institutional infrastructure in channelling cross-border capital into European living sectors. Markets that offer regulatory clarity, transparent planning processes, and established operational platforms attract disproportionate capital flows.

The scale of cross-border interest is reshaping the competitive landscape. Local developers and operators who once dominated residential markets now compete with global platforms backed by institutional balance sheets. Joint ventures between local expertise and international capital have become the dominant deal structure, allowing investors to access market knowledge while deploying capital at scale.

Spain and Germany exemplify the cross-border dynamic. Both markets combine significant housing undersupply with liquid investment markets and transparent legal frameworks, making them priority destinations for international living sector capital. The operational complexity of managing hundreds or thousands of residential units across multiple cities rewards platforms that combine local asset management with centralised technology and procurement capabilities.

The operational premium: why living assets demand a different kind of investor

The living sector's rise carries an important qualifier. These are operationally intensive assets that generate returns through active management rather than passive income collection. Student accommodation requires cycle-sensitive marketing, rapid turnover management, and amenity investment. Senior housing demands healthcare-adjacent services, regulatory compliance across multiple jurisdictions, and demographic sensitivity. Build-to-rent residential requires tenant retention strategies, community programming, and responsive maintenance operations.

This operational intensity creates a natural selection mechanism. Investors who approach living assets with a commercial real estate mindset, focused primarily on lease length and covenant strength, will underperform those who build genuine operational platforms. The premium accrues to operators, and the most successful institutional investors in the sector are those who either develop internal operating capability or partner strategically with specialist platforms.

The living sector has cemented its position as Europe's largest investment sector, and the structural forces underpinning this shift, demographic change, urbanisation, chronic undersupply, and regulatory evolution, show no signs of reversing. For institutional investors, the strategic question is no longer whether to allocate to living assets but how to build the operational infrastructure and regulatory expertise to compete effectively.

GRI Institute's dedicated focus on the living assets theme, including through its GRI Living Assets Europe programme and broader European real estate convenings, reflects the centrality of this thesis to the institutional investment community. The convergence of capital, policy, and demographics in European housing markets represents one of the defining investment narratives of this decade. The leaders who shape this market, from investors like Maud Wargny to policymakers like Pedro Baganha and development executives like Sonia Da Silva, are building the frameworks that will determine how Europe houses its population for a generation.

Capital follows conviction. In European real estate, conviction now points firmly toward living assets.