6 Alternative Assets in Real Estate that I find interesting
Beyond the tried and tested asset classes, there are many emerging assets investors should keep their eye on
Pandemic or not, real estate has been undergoing rapid transformation over the past decade. While the 5 core asset classes (Residential, commercial, hospitality, industrial and agricultural) have well understood dynamics and return cycles, there are host of new age asset classes which have huge long term potential and are likely to be very rewarding to investors.
I have thrown some light on the top 6 alternative assets I find interesting in this article.
Do share this article with your friends and colleagues who would benefit from reading this!
1. Infrastructure for servers and data centers
While snooping around about success REITs across the world, I was pleasantly surprised to find out that 2 out of the top 10 REITs in the US are data center companies, and their combined market cap is increased almost 300% over the past 5 years! (Look up Equinix, and Digital Realty Trust)
With exponential rise in capture of data, and increased movement to business applications to the cloud, companies of all scales are looking for data centers to power their business. Setting up of a data center and ensuring its smooth operation is very challenging, and hence most companies are looking for operators/institutional landlords to help them manage this.
This is a very exciting asset class, and I expect more companies and REITs to come up in this space.
2. Self-storage solutions
Storage solutions aren’t really a new asset class, but they have finally found their moment in the sun! With a rise in need for storage solutions by urbanites to declutter their homes, coupled with technology which enables operators to automate most of their operations, the returns on investing into storage solutions is increasing rapidly.
I would encourage everyone to check out this video which explains the underlying profitability of self storage solutions.
Storage solutions in emerging economies have seen a rapid increase in adoption recently as well, with companies like StowNest seeing great traction during the ongoing pandemic wherein people have gone back to their home towns after storing all their furniture in storage centers.
3. Coliving buildings
I have previous talked about why coliving is an interesting asset class (https://realestatextechnology.substack.com/p/why-is-coliving-an-interest-asset) and I remain very bullish on this sector.
Lack of good quality rental housing for young professionals, increased social isolation of young people has resulted in a high demand for coliving spaces across the globe. With large Chinese operators having scaled to 1M+ rooms under their management as a proof of potential in this industry, operators and landlords across all continents have scrambled to build high quality assets for this industry.
Though Covid-19 has adversely affect this industry, the long term potential of coliving is undeniable.
You can read a great report about coliving put out by my company (TheHouseMonk) last year here - https://thehousemonk.com/global-coliving-report/
4. Student housing
While student housing is a well established domain in the US, and Europe, but there is a lot of opportunity for this asset class in emerging economies. Most students are still staying in low quality + on campus accommodation in these countries, even though many have the financial muscle to upgrade.
There are multiple student housing operators who have emerged in this industry over the past few years (many backed by Tier-1 VCs/PEs), we can definitely expect student housing to get standardized over the next few years.
5. Warehousing focussed on e-commerce
It is no secret that e-commerce companies are ruling the roost, across the globe. High penetration of internet and smartphones, and maturity of established e-commerce players backed by huge capital from VC/PE industry has ensured that most consumers have grown accustomed internet based commerce. The pandemic has positively impacted the sector, with people preferring to order online vs going to retail outlets.
With that said, one of the backbones of the e-commerce sector is the warehousing industry. Strategically located, state of the art warehousing facilities are in high demand. With IoT devices and industrial robotics aiding warehousing operations and automations at an all time high, there is great potential for investors to create such facilities and aid the growth of the e-commerce industry.
Check out this fully automated warehouse from Ocado!
5. Senior living
Fact 1: The median age of a human today (across the planet) is 30 yrs which has increased from ~21 yrs in 1970. This increase in age is expected to continue for the next few decades as well. This simply implies that humans are getting OLDER (and living longer)
Fact 2: By 2050, 2 Billion people are expected to be older than 6 yrs, which would be a 120% increase from today, where we have 0.9 Billion people above 60 yrs old.
Add to this the empirical notion that senior people often have more financial resources than younger people, and you can understand why I am bullish about the senior living market. Over the next few decades, I am confident that we will see high quality accommodations targeted for older sections of our population with a clear intention of helping the vulnerable portions of society.
There has always been a notion that senior care is an ‘unsexy’ market - My belief is that it is only a matter of time before the spotlight is turned on this high potential segment.
Are there any asset classes that I have missed out on? Something else you find interesting? I would love to hear from you!
Drop a comment or hit ‘Reply’