Alternatives remain a sought after asset, with JLL predicting continued out performance

New JLL research reveals increasing investor demand for alternatives as the sector provides confidence amidst a constantly evolving economic environment.

February 13, 2019

London, 13th February - JLL has published the results of its Alternative Investors Survey for the seventh consecutive year, providing a unique insight into the thoughts of investors active in the market. Headline findings include: 

  • In total, JLL respondents have over £61.5 billion of alternatives assets under management, compared to £46 billion in last year’s survey, marking a 33% increase;
  • Alternatives transactions totalled a record £16.3 billion in 2018, up from £15.7 billion the year before.
  • Respondents are planning to invest an additional £14.4 billion into alternatives by 2020. Not only is this a significant proportion of the overall commercial real estate market, it also suggests a continued increase in alternatives market share.
  • Overseas investors have been a key feature of the alternatives market, accounting for 50% of all buyers in recent years.

Student housing remains the most popular choice, with one in five investors looking to invest in this area. This is followed closely by leased hotels and the developing multifamily and retirement living sectors. There are fewer investors targeting assets such as primary healthcare and self storage, but these investors are seeking to increase their exposure to these sectors more aggressively. Most respondents are looking to invest in more than one asset class, especially in those with similar demand profiles and transferable management skills. 

Ollie Saunders, lead director, Alternatives at JLL, commented: "The core fundamentals supporting alternatives are continuing to bolster the sector’s credentials as a strong investment opportunity, especially in the midst of economic uncertainty. There is still a strong need for more purpose-built supply across all sectors to meet growing demand, which is increasingly fueled by long-term demographic changes. The constantly changing nature of economic and political events could have varied impact on alternatives and commercial property in general, but, as an established and key feature of the real estate market, the sector is set to outperform traditional asset classes. For that reason we can expect continued growth in the year ahead. The flexible and multiple occupier nature of many alternatives sectors is also now driving change in the traditional property markets.”

James Kingdom, head of JLL alternatives research, concluded: " A core reason for investors targeting alternatives is the shortfall in institutional quality, modern, purpose-built assets compared to demand. Structural and demographic changes such as population growth and an ageing population are driving demand and the need for more supply. By 2025, there will be 5.5 million more people living in cities across the UK and this is set to transform how we use real estate.