Unlocking Europe’s Living Opportunity

Europe's residential sector faces a deepening structural imbalance. As urbanization and migration draw populations towards economic centers and household formation accelerates due to demographic and cultural shifts, housing supply has failed to keep pace.

Demographic shifts and housing affordability challenges have delayed homeownership by ten years, giving rise to "Generation Rent" – long-term renters who prioritize flexibility, prime locations, and service-oriented living.

Stringent building regulations, limited land availability, and rising construction costs have severely constrained development activity, creating an estimated shortfall of over 9.5 million homes across the EU¹. Vacancy rates in major cities have dropped below 3%, indicating near-full occupancy². Yet, new construction has failed to keep up, with annual new deliveries projected to meet only 64% of 2025 demand.³

Investor interest is rising in response. Residential transaction volumes increased 24% year-on-year as of Q3 2025⁴, reflecting growing market liquidity and confidence. Residential real estate is increasingly recognized as a defensive asset class with inflation- hedging characteristics, stable cash flows and a long trajectory for growth.

For those with the ability to execute locally and deliver professionally managed rental housing, the current environment offers both income stability and long-term growth potential.

Europe’s real estate markets vary widely, making location selection complex. To navigate this complexity, Partners Group's Real Estate team conducted a comprehensive analysis of European markets using our proprietary framework. This analysis combines quantitative data with expertise from both our in-house team and extensive local network to understand each market's unique characteristics.

Our proprietary model serves two key functions: identifying optimal target locations and defining our broader living location strategy. The outcome is a ranking of European locations based on their relative attractiveness and Partners Group's overall market conviction.

Vertical integration is a core differentiator for real estate investing because it minimizes both operating expense (opex) leakage and NOI leakage.

For investors, vertical integration translates into more of rental income being captured and retained at the fund level, rather than dissipating through inefficiencies or third-party margins.

Modernizing homes in Germany with Empira's green transition strategy

Empira applies a vertically integrated model to acquire and modernize under-rented, energy-inefficient residential assets in Germany's top seven cities and their surrounding metropolitan regions. Properties with low energy ratings (D or E) are upgraded to B ratings through targeted green capex, such as insulation, heating systems, solar panels, and window  replacements. These improvements not only align with ESG standards but also unlock regulated rent increases – up to EUR 3 per square meter for green investments and up to 15% every three years under rent cap legislation. Empira’s in-house control over sourcing, development, and management reduces cost leakage and boosts NOI.

The strategy builds on the success of Empira's residential portfolio strategies, which delivered a 3.8% CAGR between 2019 and 2025 in rental income across over 4,300 units, with new leases  averaging 30% above existing rents. Importantly, these rent increases have not compromised affordability, as energy-efficient upgrades have significantly reduced utility costs, offsetting the rise in rent for tenants.

OnPlace and the power of consolidated services

Launched in 2022 by Partners Group and Investire SGR, OnPlace is Italy’s first institutional-grade, vertically integrated residential platform. It manages over 1,000 units across Milan, Turin, and Rome, consolidating traditionally fragmented leasing, capex planning, maintenance, and amenity services under one roof. This integration has improved both tenant experience and financial performance.

Since launch, tenant engagement has risen by 25% and vacancy periods have shortened from 38 to 29 days. Across c. 350 new rent agreements, rental rates achieved an average increase of 97.5%, with NOI up more than proportionally by c. 3.0x. This was the result of OnPlace's increased operational efficiency and high-margin ancillary services (e.g., furniture rentals, WiFi packages, etc).

OnPlace demonstrates how operational efficiency and brand consistency can unlock value. The platform exemplifies how vertical integration can unlock scale, consistency, and profitability in a historically fragmented market.

Europe's residential sector is evolving, shaped by demographic shifts and rising tenant expectations. Meanwhile, re-priced capital markets are creating attractive entry points and strong rental growth fundamentals. Investors are drawn to the sector's stable, inflation-resistant returns, but accessing the opportunity requires more than capital. Partners Group is uniquely positioned to capitalize on this convergence.

Our vertically integrated model – combining strategic sourcing, operational control, and brand development – highlights how we transform residential properties, enhance tenant experience and generate performance. For investors looking to capitalize on Europe's residential opportunities, partnering with a platform that offers a combination of market insight, robust infrastructure, and strong execution capabilities is key to unlocking long-term value.