With Data Transparency Improving, Niche Real Estate Sectors' Prospects Are Good Amid Pandemic

Growing data transparency in alternative real estate sectors has helped push the relatively niche sectors into the mainstream, and experts expect continued interest despite the challenges of the coronavirus pandemic.

Matthew McAuley, director of global research at JLL, which recently produced a biannual transparency study with LaSalle Investment Management, said there is a strong correlation between increased transparency and increased investment.

“Investor activity in these niche sectors and improved transparency tend to be self-reinforcing,” McAuley said. “Investor interest drives a greater need for market information, while enhanced transparency allows investors to understand and thus allocate capital to these property types.”

Cold storage, self-storage, life sciences, medical office and data centers have seen the most growth in interest of the 12 niche sectors in the Global Real Estate Transparency Index 2020 report, with cold storage in the Asia-Pacific region growing especially fast.

Global investment in self-storage rose to $6.4 billion in 2019 from less than $500 million a decade earlier.

In the US and UK, activity in the niche sectors has been especially high, and the availability of data has similarly increased. Investment research giant MSCI has started incorporating medical offices in its quarterly index reporting, and the National Association of Real Estate Investment Trusts began publishing rent collection rates for U.S. healthcare properties.

Demand for clean data is especially high in the medical office and life sciences sectors, whose data is sometimes lumped together with that of conventional offices.

The niche sectors are also expected to be resilient despite COVID-19, with experts predicting interest will continue to grow amid a global focus on trends such as housing affordability, aging populations and increasing reliance on technology.

McAuley said the sectors tend to have more defensive cashflows, which have been more resilient in past recessions

“Going forward, this characteristic is likely to be especially top-of-mind for investors as we recover from COVID-19,” he said.

REIT indices for cold storage, self-storage, data centers and life sciences have borne that out this year, outperforming all-property indices in the US in the first six months of 2020.

The transparency report also found that nations already considered “highly transparent” can continue to expand their transparency, as France, Sweden, Germany and Ireland have shown.

“Even in the most information-rich markets, investors face enormous uncertainty and are hungry for data that helps them make better decisions,” McAuley said. “I think the continued increase in transparency in markets where information is already high is a testament to the fact that there’s always room for improvement.”