Alternative property investments trend set to grow in Irish market

Growing demand for alternative property investments away from the traditional office and retail sectors is an emerging trend in the market, according to CBRE.

It says more than €30 billion was invested in alternative property sectors in Europe in 2016, which represents about 15 per cent of all income-producing commercial property transactions.

Alternative property includes student housing, build- to-rent schemes, accommodation for seniors and infrastructure. For example, more than £27 billion (€31 billion) of investment funds is targeting the build-to-rent sector in the UK alone.

In the Irish context, according to CBRE, the appetite for alternative property investments is focused on build to rent, student accommodation and healthcare. Hotels and multifamily residential, financed through forward-funding mechanisms, have also proved popular.

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CBRE believes that build to rent is at an “embryonic stage”, but is set to change as institutional landlords gear up to offer an improved rental offering to tenants.

"Investors are attracted to this sector as it offers stable long-term income potential and is less susceptible to cyclical variations that other traditional real-estate sectors," says Marie Hunt, executive director and head of research at CBRE.

“Considering the seriousness of the imbalance between supply and demand in the Irish housing market, the Government is now largely supportive of large-scale, purpose-built accommodation to service the rental sector, so expect to see increased focus on this going forward.”

Investment in student accommodation has taken off in Dublin, with many substantial projects either completed, under construction or going through the planning process. This growth is being driven by specialist providers with experience of managing the high-turnover units and of finding alternative tenants through the summer months when colleges are closed.

Specialist interest

Investors are attracted to the sector as it has proven resilient to economic downturns when demand for education and, by association, student housing, typically goes up. It is this reliable source of income generation which is attracting investor interest.

“However,” says Ms Hunt, “purpose-built student accommodation is more specialist and more management-intensive that other real-estate sectors. So those considering investing should engage with specialists who have experience in developing and operating it.”

Recent investor interest in Irish healthcare property assets has focused on primary-care facilities and nursing homes, given our ageing population and pressures on the public health system.

“The healthcare sector tends to be particularly attractive to more sophisticated long-term capital and investors who have experience in this specialist sector in other jurisdictions,” says Ms Hunt.