Alternative investments

Alternative investments

Total Property - Issue 5 2017

Investor strategies need to reflect the way in which the world is transforming, and with a realisation that the “alternatives” asset class is intrinsically linked to social and demographic trends, this is affording investors a rich opportunity and making the case to expand into the sector more and more compelling, according to research by global property analysts Cushman and Wakefield.

Alternatives tend to offer strong investment fundamentals, such as leases which are longer than some more mainstream sectors, but the actual drivers behind their performance are wide-ranging.

The following summarises the key factors in play for some of the main segments of the alternatives market.

STUDENT HOUSING

Resilience to economic volatility: Demand is insulated from the economic cycle, with levels of students enrolling into higher education rising during the global economic downturn due to reduced job opportunities. Demand however is also secure during periods of economic growth due to a typical lack of quality supply.

Demographics: With 85 percent of young people completing higher education courses in the OECD, the volume of international students is rising. Favourable demographics also boost the numbers of domestic students.

Government Influence: Flexible immigration policies attract international students to a country, while lower tuition fees tend to increase the number of both domestic and international students.

SENIOR HOUSING AND HEALTHCARE

Resilience to economic volatility: The healthcare and retirement sector offer a stable income stream, with demographic trends supporting growing demand and insurance and super provision improving.

Demographics: Ageing populations are boosting the demand for retirement care.

Government Influence: High-quality care at an affordable cost is becoming more restricted. People are reliant on their savings to afford a place in private facilities.

CARPARKS

Resilience to economic volatility: Car park operators provide a steady cash flow through the continuous demand from car owners.

Demographics: Wealthy Baby Boomers have had historically high levels of car ownership. This demographic group is likely to continue driving to an older age than previous generations as a result of increased life expectancy and other social changes.

Government Influence: Low interest rates have led to higher economic growth and car purchases becoming more affordable. Despite most governments attempting to limit the number of parking spaces to try to shift demand onto public transport, CBD parking is set to remain lucrative in the years ahead.

SELF-STORAGE

Resilience to economic volatility: As consumer awareness of this market rises, demand is set to increase. Demand remains generally unaffected by political uncertainty, with global investment volumes into self-storage increasing by 53.7 percent in 2016.

Demographics: The asset class is driven primarily by life events. Examples include divorce, moving house and going to university, with people using self-storage as a temporary location to store their possessions. Baby Boomers are expected to boost demand further as they begin to downsize their houses.

Government Influence: The US, the global leader in self-storage, is seeing the emergence of more luxurious self-storage facilities, partly fuelled by local governments who enforce guidelines to ensure storage units blend in with urban environments. Other countries could move in this direction in the future.

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