Three megatrends support investments in alternative real estate

Three megatrends — a continued shift toward renting, a transformation of the U.S. healthcare system and a rise in the digital economy — will drive long-term outperformance in the alternative housing, healthcare and technology real estate property types.

The alternative sectors are likely to become more mainstream in the next decade as COVID-19 has investors realizing how crucial it is to increase diversification within their real estate portfolios. NCREIF data suggest most investors within NFI-ODCE funds have very little exposure to the alternative property types. By contrast, as of first quarter 2020, the majority of the public real estate market’s market capitalization was within the alternative real estate property types.

This view takes into account changes brought about by COVID-19. And, if anything, COVID-19 has accelerated the already strong tailwinds driving these sectors. During COVID-19, these sectors proved their resiliency relative to most of the trad