Niche Sector Pros and Cons

Which niche real estate sectors look attractive right now?

Right now, we particularly like single-family rentals (SFRs), data centers, student housing and self-storage. The United States is dealing with a tremendous housing shortage. Estimates differ, but our research indicates we need about 3 million new housing units immediately. Second, traditional multifamily, or apartments, enjoyed a tailwind of growth in the United States during the past decade, given the fact that the renter cohort was growing. That has slowed. There is still opportunity for traditional multifamily, but we have a strong forecast for growth coming in the “raising children” cohort for SFRs. Today, it is more affordable to rent than buy in the United States than it ever has been for the period we have data.

Data centers offer a similar growth profile. The sheer amount of data being created has grown exponentially, which creates demand. The AI phenomenon throws fuel on the fire. Historically, our research pointed to the data center sector as a clear growth story. Years ago, it started off being higher yielding versus the average for traditional sectors. Today, it is definitely growth-oriented. Buying well-located assets near hard-core users of data, such as government tech firms, makes sense. Development also happens if you can find the land. We are considering repositioning industrial land for data center uses.