This week’s Estates Gazette Big Question explores the world of alternative property, which is gaining popularity with UK real estate investors, from small funds right up to the largest institutions. Student housing was the best-performing real estate asset class in Q3, according to data released this week by IPD.
There is a huge diversity of risk and return profiles within the “alternatives” bracket. The inclusion of assets such as infrastructure, GP surgeries and care homes under the alternatives banner greatly expands the size of the investible universe in the UK. But each subsector behaves very differently, and not all will be to the tastes of real estate investors.
We asked a panel of more than 500 property professionals which classes of alternative property they would invest in. Although a significant percentage (28%) picked student housing, the most popular class was the private rented sector, with 44% of property professionals saying this would be their preferred choice. Another 12% chose infrastructure. However, no one picked the hotels sector.
On why alternatives are so appealing, those surveyed cited good demand now and in the foreseeable future, the fact they are “less prone to market fluctuations” and safe returns as key reasons to invest.
“Alternatives offer a unique mix of income, diversification and capital resilience,” said one panellist.
But not everyone is ready to jump on the alternatives bandwagon. When asked what might dissuade them from investing, nearly 30% of panellists said it would be because they didn’t believe the hype. Other reasons for not investing included a lengthy due diligence process (29%), alternatives proving difficult to benchmark (17%) and the fact that they don’t produce enough income (8%).
