Publications

- September 1, 2021: Vol. 33, Number 8

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The future of commercial real estate: Nontraditional property types are no longer niche

by Indraneel Karlekar

Historically, real estate institutional investors have allocated capital to five property types in the U.S. — office, retail, multifamily, industrial and, decreasingly, hotel. In recent years niche and emerging property types (herein referred to as nontraditional) have seen a significant increase in investor interest and capital allocated in both the public and private real estate quadrants. According to Real Capital Analytics, as of year-end 2020, alternative property types accounted for approximately 24 percent of all transaction volume in the United States and approximately 56 percent of total REIT market capitalization. Rapid growth and investment into these fast-growing property types that sit outside the traditional sectors of institutional real estate are clearly worthy of a deeper dive.

The listed REIT market has spearheaded the push into nontraditional property types, greatly expanding the investment universe and improving the diversification outcome for investors.

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