Savills says the increased appetite for the alternative sector reflects investors search for long-term, stable income streams supported by structural demand drivers, against a backdrop of political uncertainty and a maturing property cycle. A total of £8.3 billion has been invested into alternatives this year including PRS and student housing, Savills data shows.
Compared to other asset classes, London offices has recorded £6.4 billion of investment, while UK industrial stands at £3.9 billion and UK retail £3.1 billion, which serves to underline the mainstream credentials of the often-dubbed ‘alternative’ sector.
Savills says domestic investors have accounted for the lion’s share of investment into alternatives notes the firm, with just under £5 billion spent.
James Gulliford, joint head of investment at Savills, explains:
“Alternatives are rapidly becoming Conventionals as political uncertainty and Brexit continue to delay decision making in traditional markets. In response, investors are turning to assets with operating models that have both perceived structural support and more stable income prospects.”
The growth in the alternatives sector has also been supported by increased institutionalisation – and maturity – of the popular asset class, supported by ever-greater reams of data and analysis which supports due diligence, risk monitoring, relative value analysis and performance measurement.
There are two clear pools of capital chasing the sector: long-term liability-matching capital of pension funds and insurance companies, and private equity which are chasing the scale through building platforms – across the ‘beds and sheds’ sectors – for eventual exit to natural long-term owners and through IPOs.