Niche and Alternative Commercial Assets See a Surge in Sales Activity
Terrydale Capital
May 2, 2024 5 Min read
Compared to Q4 of 2023, sales of alternative and niche commercial assets have seen a rise in volume of nearly 41%. These assets include data centers, industrial manufacturing facilities, self-storage facilities, cold storage, and age restricted assets such as student housing and senior facilities. Here, we’ll dive into where the trends are forming and which alternative assets are showing the most robust growth.
Where The Trends Sit
Medical office boasted the largest volume increase in sales and just in March alone. The merger between Physicians Realty Trust and HealthPeak is pointed as the heaviest influence on the nearly 239% year-over-year change in the medical office market.
Student housing posted a 22% growth in sales volume which made it the second highest over the other alternative assets. Research and development assets showed a little over 4% growth.
Self-storage assets benefitted from high volumes of portfolio acquisitions. While it only saw a 4% year-over-year change compared to Q1 of 2023, it posted 17% above the average of the last decade with a sales volume of $1.6 billion. However, compared to R&D’s growth of 4%, self-storage’s growth relied heavily on a smaller number of large deals.
Data centers, despite being a favorite by many and expected to post heavy growth, experienced the second largest year-over-year drop of 56%. Experts attribute this to the lack of entity and portfolio investment, where data centers had benefited highly from in prior years.
Three other assets posted negative growth for Q1. Mobile homes and manufactured housing had the smallest decline with -6% calculated between the two. Cold storage saw a sales decrease of -10%. However, the largest decline in sales came from the age restricted assets such as student housing and senior housing with a decline of -74%.
Takeaways
While the broad picture appears to be a surge in sales volume for the alternative and niche sector, when broken down the trends share a much deeper story.
Entity, high net-worth and group investors have been the largest contributors to growth when they are present. Assets that have relied on large investment portfolio acquisitions have struggled in their absence. While individual investors are still making their dives into the market, their numbers have a smaller impact on the broader market trends compared to large investors whose portfolio and large-ticket investments make up a larger share.
The trend of numbers also reflects the uncertainties surrounding the market as it stands currently. Many are choosing to wait out the current state until news of interest rate cuts become more realized before heading into the alternative and niche markets. Until then, the markets continue to be dominated by main core assets such as multifamily.
Conclusion
Until news surrounding rates become more positive towards cuts, the market remains in a state of limbo. While there are plenty of opportunities present currently, many are simply choosing to wait it out for the big break. If you are currently shooting for an investment opportunity, it always pays to have the right team at your side. At Terrydale Capital we boast a collective expertise and industry connections to assist our clients find success in any situation. Contact us today!
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