Getting down into the niches: From niches come riches as Investors turn to New Property Types outside Traditional Core Sectors

OCTOBER 2024

After some brutal passages in the 2000s, many institutional investors are seeking diversification and returns in “niche” property sectors.

And for good reason. In recent decades, entire core sectors of the real estate universe have shown an unnerving propensity to deliver gut punches to investors, including most prominently and recently U.S. office-market properties.

However, none of the major property sectors have been immune to sudden plunges, such as those that struck the industrial and residential categories during the global financial crisis (GFC) years of 2008–2009.

Getting down into the niches

So, what are some of the noncore property types now attracting institutional capital? “Some niche sectors we are actively evaluating are RV storage, manufactured housing, marina and boat storage, gas and convenience, and co-living spaces,” says Scott Davies, co-head of real estate at the Philadelphia-based Hamilton Lane, an outfit with $920 billion under management or supervision.

An interesting play in the current context is boating marinas, emphasizes Davies.

“Marinas have exceptionally high barriers against new supply, while the industry benefits from tailwinds illustrated by sustained boat sales and growing demand. Limited developable land, stringent regulations to develop marinas and up-front costs for the asset class provide additional barriers to entry,” he explains.

Of course, successful investing in such idiosyncratic niches requires intense due diligence and usually partnering with operators who have extensive industry experience, advises Davies.

Extended-stay hotels are another segment garnering institutional property investor attention. There are 7,000 extended-stay or select-service hotels in the United States, and the sector is highly fragmented and even ripe for roll-ups, explains Desi Co, managing partner at the San Francisco–based Accord Group.

These hotels, which largely target business travelers who are on location for a few weeks or months, usually offer middle-quality rooms with kitchenettes and on-site laundry facilities. The typical revenue per day per room (RevPAR) in an extended-stay hotel now tops $100, and the sector has outperformed all the traditional core sectors in the past 10 years, says Co.

There is growing demand for extended-stay facilities, as more people travel to take short-term employment opportunities, says Co. A review of social media platforms indicates with much of the United States experiencing chronic housing shortages, many non-travelers are also using extended-stays as a stopgap measure until suitable residential accommodations can be found.

To read the full article, click here.

ABOUT ACCORD CAPITAL PARTNERS LLC

Accord, through its affiliates, is a global capital advisor, principal investor and investment manager. With its headquarters in San Francisco and personnel in Chicago, London, Hong Kong and Seoul, Accord engages with a wide variety of participants in the real estate private equity industry. Accord Capital Partners, its broker/dealer affiliate, provides advisory and capital raising services in the United States. Accord Europe Limited, its broker/dealer affiliate, provides advisory and capital raising services in the United Kingdom and Europe. For further information on Accord, visit: www.accord-group.net.