Unlocking Alternatives: Investing Beyond the Major CRE Asset Type

DYNAMIC SECTORS Since our last report on these sectors in 2019, a substantial amount has shifted as the pandemic, inflation and now a restrictive capital markets space have dramatically shifted the landscape of alternative CRE asset types. KEY TAKEAWAYS Cycle-specific effects of the pandemic, such as the rise of remote/hybrid work and hastening of family formations, have amplified longer-term secular demand drivers that have steadily grown these sectors. SURVIVORS AND THRIVERS During the last three economic downturns (Dot Com, GFC, COVID-19), alternative assets consistently outperformed the recovery of the major asset types. This data continues to reinforce the idea that alternative assets could offer a safe haven for capital in the event of a future economic downturn. LONG- AND SHORT-TERM FACTORS AT PLAY

RESILIENT TO RECENT HEADWINDS While overall transaction activity has trended downward over the past year along with the rest of CRE, a number of these subsectors have shown resiliency and have maintained strong operating fundamentals in rent and occupancy. RUNWAY FOR CAPITAL A number of these asset types continue to be operated by non-institutional entities. Institutional participation in alternative asset sectors varies, and there is room for further expansion. This expansion has the potential to bolster pricing and liquidity, creating a mutually beneficial cycle. BARRIERS TO ENTRY Investors should be aware of operational, regulatory, and industry-specific nuances to managing these property types—often market entry will involve selecting the right acquisition target or experienced partner to execute a feasible strategy.

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