Growing Demand for “Other” Real Estate Sectors

May 16, 2018 | Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets

 

This chart examines the most recent property type sector breakdown within the NFI-ODCE¹ including apartments, industrial, office, retail and other. While the actual “other” sector only represents 4% of the NFI-ODCE index exposure and typically includes land, parking and self-storage, what’s not that apparent is the “other” allocations within apartments and office.

Over the past several years, NCREIF has been trying to capture and measure “other” subtypes such as student housing and medical office, life sciences, manufactured housing and senior living under a field labeled for usage, but the reporting among ODCE managers has been inconsistent across the board. For example, a manager may report a student housing asset as “apartment” with a classification for garden, high rise or low rise, while at the same time submit the asset under the “usage” field making it unclear how much student housing is represented within the apartments sector.

With that said, managers have started and are likely to increase their exposures to these “other” property types given their unique risk-adjusted return profiles in this mature market cycle. For example, medical office and life science tenants tend to be much stickier and sign longer-term leases compared to traditional office tenants making them a more attractive tenant to have. The question going forward will be whether or not these “other” sectors develop into more mainstream standalone sectors and how much they will represent within the ODCE over the coming years.

Print PDF

 

¹The NCREIF Fund Index – Open End Diversified Core Equity (“NFI-ODCE”) – is an index of fund-level investment returns reporting on both a historical and current basis.

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 

Jeremy Zirin, CAIA
Senior Research Analyst, Real Assets

Get to Know Jeremy

Related Content

chart displaying Looming Maturity Wall for Emerging Markets Debt

08.16.2018

Looming Maturity Wall for Emerging Markets Debt

This week’s chart looks at the looming maturity wall for emerging markets debt. The chart shows the amounts coming due…

Chart displaying market cap of the five largess S&P 500 stocks since the late 1990's

08.08.2018

Tech Sector Bubble?

Our Chart of the Week examines the concentration in market cap over time among the five largest stocks in the…

08.02.2018

Is it Value’s Turn?

This week we examine factor performance from the Russell 1000, with a focus on the dynamic between growth and value…

07.30.2018

A “Halftime” Review of Asset Allocation for 2018

As of June 30th, the Russell 3000 index was up only 3.2%, a far cry from its 10-year annualized return…

Puerto Rico General Obligation 2035 bond prices over time chart

07.27.2018

The Impact of Puerto Rico on Hedge Funds

With the first half of 2018 behind us, our chart of the week touches on one of the more profitable…

Chart

07.19.2018

Do Rising Rates Mean Lower Returns for EM Equities?

Rising rate environments are typically thought to put downward pressure on equity returns. Specifically for emerging market (“EM”) equities, the…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >