Key Takeaways
- • JLL's 'Alternatives Investment Outlook 2023' report identifies sustained elevated investment volumes in alternative real estate sectors since 2019, with the investable universe expanding despite 2022's economic headwinds, particularly in build-to-rent (BTR) and data centre segments.
- • Alternative real estate encompasses three broad categories—living, social infrastructure, and infra-lite—spanning student accommodation, data centres, retirement facilities, co-living, BTR, disability accommodation, aged care, private hospitals, childcare, self-storage, and renewables, each driven by distinct demographic or structural tailwinds.
- • Demographic forces underpin sector growth: rising dual-income households are increasing childcare demand; Australia's ageing population is spurring healthcare and senior living investment; and structural shifts continue to reshape residential and infrastructure investment priorities.
- • Alternative real estate sectors are expected to assume increasingly material roles in institutional investment portfolios as investors reweight allocations in response to high-inflation environments and the search for yield-generating assets.
- • Sector maturity, regulatory frameworks, and variation in tailwind strength will determine the trajectory of investable universe expansion across alternative segments over the coming decade, according to JLL's Associate Director of Alternatives Research Louise Burke.
Summary
JLL's latest research, published as the 'Alternatives Investment Outlook 2023,' documents sustained momentum in alternative real estate investment despite macroeconomic turbulence in 2022. Investment volumes into alternative sectors have remained elevated relative to historical standards since 2019, and the broader investable universe has continued to expand—a trend driven principally by high-growth segments including build-to-rent (BTR) residential and data centre infrastructure.
The alternative real estate universe spans three primary categories: living (student accommodation, co-living, BTR, retirement facilities), social infrastructure (aged care, private hospitals, special disability accommodation, childcare), and infra-lite assets (self-storage, renewables). These segments are characterised by compelling demographic and structural tailwinds that position them as increasingly attractive income-generating vehicles for institutional investors navigating high-inflation environments.
Louise Burke, JLL's Associate Director for Alternatives Research and lead author of the outlook, emphasised that nearly all alternative real estate sectors benefit from identifiable demographic or structural drivers. She cited two prominent examples: the growth of dual-income households fuelling demand for childcare services, and Australia's ageing population profile generating sustained demand for senior living and healthcare-related real estate assets. These tailwinds underscore the fundamental demand dynamics supporting capital allocation to the sector.
The 2023 outlook anticipates alternative real estate will play an expanding role within diversified institutional portfolios as investors recalibrate asset allocation strategies. However, Burke noted that variations in tailwind strength, combined with relative sector maturity levels and evolving regulatory environments, will ultimately determine the pace and scale of investable universe growth across specific alternative segments over the next decade. This differentiated outlook suggests a selective rather than monolithic approach to capital deployment across the alternative real estate opportunity set.
The alternative real estate universe spans three primary categories: living (student accommodation, co-living, BTR, retirement facilities), social infrastructure (aged care, private hospitals, special disability accommodation, childcare), and infra-lite assets (self-storage, renewables). These segments are characterised by compelling demographic and structural tailwinds that position them as increasingly attractive income-generating vehicles for institutional investors navigating high-inflation environments.
Louise Burke, JLL's Associate Director for Alternatives Research and lead author of the outlook, emphasised that nearly all alternative real estate sectors benefit from identifiable demographic or structural drivers. She cited two prominent examples: the growth of dual-income households fuelling demand for childcare services, and Australia's ageing population profile generating sustained demand for senior living and healthcare-related real estate assets. These tailwinds underscore the fundamental demand dynamics supporting capital allocation to the sector.
The 2023 outlook anticipates alternative real estate will play an expanding role within diversified institutional portfolios as investors recalibrate asset allocation strategies. However, Burke noted that variations in tailwind strength, combined with relative sector maturity levels and evolving regulatory environments, will ultimately determine the pace and scale of investable universe growth across specific alternative segments over the next decade. This differentiated outlook suggests a selective rather than monolithic approach to capital deployment across the alternative real estate opportunity set.
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