Real estate owners selling some of the underperforming properties and streamlining their portfolios are finding plenty of buyers, with an increasing number converting distressed assets into new uses that are in high demand, such as affordable housing, behavioral health facilities and student accommodation, according to JLL.

“The trend of opening up these distressed properties to a much larger buyer pool is here to stay for the foreseeable future given the demand from a wide array of users,” said Jason Skalko, director, JLL Capital Markets, senior housing and healthcare. “We are seeing more interest in behavioral health conversions, including rehabs, and there is unlimited demand for affordable housing.”

In the hotel sector, interest in conversions has grown during the pandemic, sometimes leaving traditional hotel investors outbid. In the U.S., alternate-use investors are pushing pricing between 25 percent and 35 percent above traditional levels. Recent activity