Institutional Interest in These Specialized Assets is Here to Stay
Investors fled to alternative asset classes during the pandemic and won’t be pulling out as it recedes.
Much has been written about the flight of institutional investors to specialized assets during the peak of the COVID-19 pandemic, but some experts now say the push toward sectors like data centers, cold storage, life science, and medical office space is here to stay.
A new report from Colliers shows that industrial was the frontrunner for investors throughout COVID, with data centers surfacing as perhaps the most obvious beneficiary of the pandemic shift to WFH. And cold storage posted record volume in 2020, with sales up 22.9%.
“As the food supply chain rapidly evolves and modernizes, investing in the ‘last mile of food’ is the next frontier, with suppliers working to shift their current logistics and distribution networks closer to home,” the report states. “One of the driving forces is a surge in e-commerce volume, with groceries playing a prominent role.”
On the office front, life science is dominating—especially in Boston, which led the nation in office sales volume in 2020. That trend is continuing into 2021, with Boston posting the largest lab transactions nationwide and accounting for 24% of all sales volume in Q1. Overall, the life science market has averaged an IPO once every 3.5 days since the beginning of last year, according to Colliers, with activity centered in markets like Boston, San Francisco, and San Diego.
“Other cities are getting in on the action, suggesting that this growth driver will boost additional markets nationwide,” the report notes. “Interest in life science has expanded rapidly, beyond the usual players. International capital sources are looking to partner with established operators or diversify their office holdings by investing a portion of their office allocations to lab and life science.”
And despite a rise in telemedicine during the pandemic, medical office space remains a hot target for institutional investors, which accounted for about 35% of buyers in the early part of this year (compared to 31% in 2020). Colliers predicts aging baby boomers will be pivotal in growing demand for this sector, as that demographic will be 65 or older by the year 2030.