Strategising for success in the next phase of modern living
PATRIZIA Corporate Communications thought leadership lead Andrew Belt pulls out some of the main learnings from the company’s flagship research report on the European living sector, which details how the next phase of modern living requires more nuanced, localised investment strategies.
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.
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.
Dr Marcus Cieleback – PATRIZIA Chief Urban Economist - comments:
“The old macro playbook has lost its predictive power so investors need a new investment compass.”
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.
Click on the boxes below to learn more about PATRIZIA’s approach and allocation to some of these segments and housing types.
