Alternative assets to catch eye of institutional investors

Aveo Springfield, part of the retirement home boom.

Alternative real estate investments such as aged care facilities and data centres are set to benefit from a wave of institutional capital in coming years, according to JLL research.

Australia is unlikely to need as much new office and retail space as in the past, meaning the stock of core real estate investments is set to grow by 4 to 5% per annum at best, according to the JLL report titled New Frontiers: Capital’s shift into alternative real estate in Australia.

The amount of capital looking for a home across the nation is likely to grow by more than 7.5% per annum, meaning investors will need to find other opportunities.

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“Investors will be faced with three choices — continue to pay more for core real estate, go offshore or find new alternative real estate sectors to invest in,” JLL national head of alternative investments Noral Wild says.

“The most likely outcome will probably be a combination of all three options, but we believe there is little doubt that institutional investment will have to move into new sectors.”

Alternative assets could include retirement living, aged care, private hospitals, childcare, self-storage, student accom­modation, agriculture, data centres, build-to-rent residential and renewables.

JLL national director of research Leigh Warner says any movement into alternatives will raise questions about whether the investment is only a late-cycle trend.

“But abstracting from cyclical factors, we firmly believe that the long-term drivers of capital into alternatives are strong,” Warner says.

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