Alternative real estate assets are rising in popularity owing to their higher returns
Alternative property assets have been firmly ensconced in the European real estate mainstream for the past 15 years and they have been proven to contribute more than 25 per cent of investment activity, according to a Savills report. As investors are starting to look past the conventional office, retail or industrial property as investment opportunities, alternative real estate assets are rising in popularity owing to their higher returns.
Niche alternative assets such as healthcare/clinics, leisure, hospitality and education assets, senior housing, children’s daycare or students’ accommodation outline lower transactional volumes, less liquidity, lower transparency and can produce higher yields than traditional commercial property assets.
These alternative investment opportunities involve different business models but possess strong underlying real estate fundamentals, which make them highly attractive for savvy investors and developers looking to expand their horizons.
While these types of investments may not have been widely popular in the UAE so far, the tide is definitely turning. The government’s support and commitment to become an internationally recognised hub for quality healthcare and education has turned many investors’ attention towards a more diversified venture portfolio.
The UAE Vision 2021 National Agenda strives to bring a structural shift to the healthcare system, predicting a record 60 per cent growth to Dh103 million in the next five years, promoting new segments such as daycare surgery, cosmetic surgeries, digitisation and medical tourism in order to cater to the needs of a more demanding millennial population.
“We expect private-public partnerships will increase in the next few years. It is one of the key programmes of the new strategy,” said Haidar Al Yousuf, director of health funding department at the Dubai Health Authority.
It is not only the healthcare sector that is experiencing a pivotal period of growth, but the UAE’s educational system has also been seeing many investment look-ins as Dubai has become more visible on the international map for prospective students and parents. The level of investments in the school market has increased by 22 per cent, bringing $2.7 billion into the education sector, reshaping the landscape of education locally. As innovation and technology will reform the outdated curriculum and attract skilled workforce into the system, the education sector will provide many chances for profit.
Investors who canvass these type of alternative solutions, either as a real estate asset (investment in hospitals and schools via sales and leaseback) or as a private equity (direct business involvement), can earn 15 to 20 per cent more in margins compared to eight to 10 per cent return from a conventional property. If done with the correct discernment, these alternative assets have the potential of a gold mine for developers and investors.
[Source: Khaleej Times, Sept 19, 2017]