This Week's Boston Deal Sheet

Alternative real estate assets, including niche property types like self-storage, student housing and medical office buildings, have long lived on the margins of commercial real estate investing. But as historically preferred property types like offices lose value, these specialized asset classes are gaining ground as investment targets.

During the third quarter, investment in alternative property types spiked to $18.3B, making up 15% of total investment dollars, according to MSCI. Full-year data isn’t yet available, but capital markets experts say that the share of investment in alternative assets is expected to grow.

“Every time you listen to an institutional investor share their best ideas for sector strategy, all you hear is data centers, student housing, self-storage, life sciences,” Michael Gordon, a partner and global chief investment officer at Harrison Street, told the Urban Land Institute.

2023 was a difficult year for investment, but the atmosphere is likely to change in 2024 if the Federal Reserve follows through on its  December commentary indicating that interest rate cuts could be in the cards this year. “Overall, there's an expectation that assuming the Fed does cut…

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In Case You Missed It...

The third Wednesday of every month is a day that is currently ringed in red on the calendar of every investor in UK real estate. 

That’s the day the UK's Office of National Statistics releases inflation data. And how that data moved the previous month matters enormously for real estate prospects over the next year because where inflation goes, interest rates follow. 

“Markets had started to price in big interest rates falls at the end of last year. It was just a case of when, by how much and which central bank went first,” Savills Head of Global Cross Border Investment Rasheed Hassan said.

“That has tempered a touch in the first few weeks of this year, but the notion that we are past the worst remains,” Hassan added. “Despite the slight retrenchment, the difference in five-year SONIA from high to low was in the order of 200 basis points in the last couple of months and yields are still high. If investors are going to take a cyclical position, it is feeling like a good time to try and do it.”

With the UK economy expected to be sluggish — EY  is predicting gross domestic product will grow by just 0.9% this year — 2024 is not going to be one to tell the grandkids about for UK real estate.  But falling inflation leading to falling interest rates is…

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