In the past several years we have seen self-storage and manufactured housing communities/mobile home parks become more institutionalized. Life science properties and cold storage have also seen a large influx of capital over the past couple years. Now I am seeing a lot of institutional attention for industrial outdoor storage. What under the radar niche asset classes/sub property types do you think will be the next trend?
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Not so much under the radar but very optimistic about logistics spaces. It will be important in the next decade to have logistic capabilities along major highway/ shipping arteries. It will make or break a companies ability to deliver goods fast.
Lol this is literally the opposite of the answer to his question
Not niche but life science assets in cities without a huge existing foot print. Boston/Cambridge is overly saturated but NY seems to be a couple years behind - we'll see if it takes hold.
What is a life science asset
Lab/bio-tech/life science space. Look up Alexandria Real Estate Equities - biggest REIT in the space.
I have a guy I went to school with who works for QTS. They build data centers. Turnover is very low, most tenants who leave only do so because they need more data storage space. At the time there were only a handful of companies building them, not sure what it's like now. But they could build these in unique areas. Access to an electric grid was one of the main concerns. And according to him they would have 500 basis point spreads between return on costs and exit cap rate.
Film Production Studios.
100% agree. Have two under contract at the moment and trying to get more.
I would have never guessed this
Awesome. Are you looking for these in locations that are established production hubs (i.e. Los Angeles, Atlanta, etc.)? Curious if there might be opportunities outside of these areas.
I worked on developing one of these. It's literally warehouses you can charge a giant premium for.
Large scale cannabis production facilities.
4.20% cap rates incoming
Seems like most of the big players (especially in Canada) got caught up with maximizing production capacity to increase their valuations in 2018 - 2020. Would definitely be interesting to see if they pivot to fewer and larger facilities to stem their losses!
Prisons
WALT is anywhere from 10 to life.
Outdoor storage is under the radar but has blown up. Institutional capital is only now just flooding in
Late Stage Tech Secondary Shares. Involved with it right now it’s finally getting a lot more big boi attention
I have seen and heard an uptick about campgrounds and covered parking popping up.
Some bigger shops seem to be doing studio space (think movies, not office) deals which looks interesting.
Affordable private grade school education
This is a new one for me. Is the focus of this on the buildings themselves or is it working with new education operators? Bit confused on the RE angle here as it sounds more like this would fall in the VC space (new education model etc)?
cGMP - lots of biotech / pharma companies that are moving into Stage 2 / Stage 3 and need to start actually producing their products. Seems to be somewhat differentiated from life science / lab research spaces, still learning more about it.
How do you underwrite these? It seems the costs are so incredibly insane you couldn’t get your return. Rents would have to be crazy, no?
I just underwrote of these for our clients for the debt. The metrics are mind boggling. Class C office, $650 cost basis, $45 NNN rents, and $850 PSF exit. Close to NIH but 100% spec.
To piggyback on life science, another highly valuable niche is intellectual property in life sciences. Pharma giants will buy the IP of little biotech companies who have successfully created and shown efficacy of a new molecule to solve some health concern. From my limited understanding of working in this space, there seems to be a concentration in the acquisition of these little companies by the existing pharma giants because they know the space and have the personnel that know the disease state and science of the subject matter. I could see PE getting more involved here. I'm not sure what the exact ratio is but there is a known ratio that exists in the pharma world of when a drug passes a certain stage of the drug development process, there is a positive ratio in favor of the drug making it to market. Don't quote me but I believe it's passing stage 3. Now, this doesn't mean it will necessarily perform in the market and the pharma industry is highly competitive but there seems to be a heavy concentration by the existing giants to swallow up all of the promising new molecules that enter the market.
Radiation bunkers
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Personally think infrastructure will be huge in the years to come with investor thirst for yield and opportunities in energy transition while being defensive and recession-proof, especially core infra
Brothels - specifically those owned by Native American tribes under sovereign immunity.
very niche one, not saying it will be the next hot class, but just interesting and seeing it more and more. Outdoor Industrial Storage .... think industrial land / lots mostly for equipment / truck parking... but could be leased to CAT, Amazon etc. Little odd bc its usually shit land in shit nowhere but decent long term lease.. but JPM, AIG etc just raised large funds / are raising funds just for this class.
Outdoor Industrial Storage....so land
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