Nery Alaev writes about alternative real estate assets in Europe.
According to Savills, a major global real estate company, ‘alternative’ assets now make up a quarter of European real estate transactions – a jump of 10% from the last market peak in 2007.
Today I’ve decided to look further into the news as well as discuss the nature of alternative assets.
What is an alternative asset?
According to Wikipedia, an alternative asset is:
“…a newer type of asset that has not been traditionally considered part of an investment portfolio. Historically, examples include real estate, commodities, as well as rare coins and stamps, artwork or trading cards.”
In a real estate-specific context, ‘alternative’ assets are similar to the broader term in nature. For example, real estate properties such as leisure centres, care homes and student accommodation are considered ‘alternative’ because they have lower transaction volumes, less liquidity and less transparency.
The factor of less liquidity is similar to the broader definition of alternative assets in general.
Why assets are stronger now
According to Savills, demographics are a reason for the asset class’s growth alongside the higher yields they offer.
For example, Europe has an ageing population that has led to increased demand for care homes. Also, the high numbers of international students in the continent has led to increased demand for student accommodation specially built for learners.
This has helped to strengthen the alternative class and has brought about the surprising 25% of all transactions figure.
Marcus Lemli of Savills Europe said:
“These predictable demographic trends, the low correlation of alternative assets with economic cycles, and the stable income that they can produce are factors that make such assets popular with investors.”
Mr Lemli’s comment implies that there are several reasons for the growing popularity of alternative assets in Europe.
Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.