Alternatives assets under management have grown by 33% to exceed a value of £61.5bn during 2018, according to new findings by JLL.
This compares with an equivalent of £46bn in the previous year.
Alternatives transactions totalled a record £16.3bn in 2018, up from £15.7bn in the previous year.
Investors are planning to invest an additional £14.4bn in alternatives by 2020, according to the report, signposting more growth in market share in overall commercial real estate.
Overseas investors were highlighted as a key factor in demand for alternatives, accounting for 50% of all buyers in recent years.
Student housing remained the most popular choice, with 20% of respondents looking to invest in this area.
This is followed closely by leased hotels, and the developing multifamily and retirement living sectors.
Fewer investors targeted assets such as primary healthcare and self storage, but the report noted that these investors are seeking to increase their exposure to these sectors more aggressively.
The majority of respondents sought investment in more than one asset class, especially in categories with similar demand profiles and transferable management skills.
Ollie Saunders, lead director of alternatives at JLL, said: “There is still a strong need for more purpose-built supply across all sectors to meet growing demand, which is increasingly fuelled by long-term demographic changes.
“The constantly changing nature of economic and political events could have varied impact on alternatives and commercial property in general, but, as an established and key feature of the real-estate market, the sector is set to outperform traditional asset classes.
“For that reason we can expect continued growth in the year ahead. The flexible and multiple occupier nature of many alternatives sectors is also now driving change in the traditional property markets.”
James Kingdom, head of JLL alternatives research, said: “ A core reason for investors targeting alternatives is the shortfall in institutional quality, modern, purpose-built assets compared to demand.
“Structural and demographic changes such as population growth and an ageing population are driving demand and the need for more supply. By 2025, there will be 5.5m more people living in cities across the UK and this is set to transform how we use real estate.”
To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette
