Alternatives

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In the 2020s, the U.S. population of 40-49-year-olds will grow by more than 10%, the fastest of any age group outside of 65+. Given affordability challenges in the single-family market, this demographic will likely rent at an outsized pace, gravitating toward BTR product.
BTR product has outperformed at both a national level, as well as within our third-party management portfolio across demand levels, trade outs, delinquency and more.
Only a small fraction of the multifamily market at present, BTR is poised to become more institutional, but likely requires more development to cement that path. Thus, it may see outsized construction activity—potentially leading to uneven performance over the next few years.

A steadily growing population of university-aged students offers relatively more surety in outlook. Forecasts suggest that the total number of students will approach 20 million by the end of the decade.
Student housing assets have outperformed the broader multifamily market over the past few years, thanks to a development pipeline that has all but shut down in the wake of the pandemic. As a result, occupancies improved and rent growth should outperform the broader multifamily sector through 2025-2026.
Larger schools, especially top-tier state institutions with more stable demand pools, are likely to garner the majority of the activity and growth over the next few years.

The fastest-growing age cohort in population is those over the age of 75, which is expected to increase by over 50% in the next 12 years. This demographic shift will provide substantial demand for senior living over the next 10-20 years.
With the pandemic in the rearview mirror, occupancies have recovered and so too has rent growth. To meet this growing demand, we estimate the need for an additional 35,000 units of new supply per year through 2045, well ahead of the current pace of roughly 25,000 units.
In the years ahead, we expect renewed interest from investors across the sub-sectors (i.e., independent living, assisted living, and memory care) as construction will race to keep up with growing demand.

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An aging global population requires more medicines, providing a secular demand driver for life sciences real estate.
Sensitivity to interest rates and funding markets has led to a near-term slowdown in demand. Net absorption was negative in 2023 for the first time this decade.
Not all of the market correction is demand-led. The overall vacancy rate increased to 17.2% in Q1 2024 from 15.0% in Q4 2023 as nearly 12 million square feet (msf) of new space delivered in 2023, representing 5.7 % of inventory.
Vacancy is expected to increase further this year with another 16 msf of space delivering, or 7.6% of inventory. The incoming construction pipeline has slowed down, indicating that the number of completions in 2025-26 will decrease significantly and allow vacancy to stabilize.

Driven by similar demographic trends as those affecting senior housing and life sciences, an aging population and rising healthcare spending has spurred continued growth.
After working through operating budget challenges in 2023, many healthcare systems have looked to control labor costs and are actively evaluating conversion of administrative office space into direct healthcare uses. This conversion strategy has addressed both the rising hybrid and remote work prevalence of health system back-office talent, as well as controlling capital costs for expanding clinical space.
Healthcare asset performance continues to remain strong, with average national occupancy at 91.5% and rent growth continuing to range from 2.5% to 3.5% in many markets.

The growth of major cloud computing platforms and the emergent surge of AI interest continue to be the primary drivers of growth in the data center sector. While its rate of growth decelerated in 2023, cloud revenue growth is now back up to an estimated 20% year-over-year (YOY) in Q2 2024.
Almost all major markets continue to remain at record low vacancy levels between <1% to 5%. Lease rates remain elevated as the market remains highly competitive for large capacity leases, driving preleasing rates of 70%+.
Despite the challenges of power availability in many markets, the North American data center market pipeline continues to grow. With a development pipeline of 24GW, the region’s total capacity is poised to grow 2.5x over the next several years.