Rapleys has labelled Alternatives as the ‘go-to’ investment for real estate players in 2025 – citing returns and added value opportunities to be found in a number of niche sectors.
The property consultancy, which has a newly launched office in Cardiff, has published its latest report into Alternative real estate industries. The research showcases what it says are the very real opportunities for real estate stakeholders who are looking to deploy capital outside of traditional asset classes in order to diversify their portfolios.
The report cites the performance of various industries that have strong underlying fundamentals, labelling the Living and Healthcare sectors as the most opportunistic.
Affordable Housing, BTR, Dentists and Vets have all seen strong demand and rental growth that is set to continue over the next three years. In addition, government supported sectors like data centres – where strong rhetoric of support and positive planning decisions have already been made – infrastructure and renewables, which have had a renewed focus by the UK Government, in addition to the focus on housing mean that these sectors are also commanding attention.
Investors from overseas in particular from North America, Japan, Hong Kong and Singapore are focused on the UK Real Estate market, thanks to domestic economic and geopolitical disruption which represents a very real opportunity for specialist consultants in such sectors, given new entrants’ lack of relative experience and knowledge of domestic niche assets.
Dan Jones, Partner in Rapleys’ Cardiff office, explains:
“Across the 19 niche property industries we have reviewed come niche opportunities but also niche challenges and risks which need careful navigation by new or relatively inexperienced investors and stakeholders to the market. This report is the second in our Alternatives report and takes a deep dive into what the outlook for these assets is and what challenges are identified and can be overcome. This is particularly pertinent for investors targeting or based in Wales where opportunities for Alternative assets can be readily identified.”
Robert Clarke, Senior Partner at Rapleys, added:
“Compared to 2024, the outlook for these sectors has changed – not only due to market demand but also the new government’s support across housing and infrastructure in particular. Investors need a partner that understands the lifecycle of each asset implicitly from planning to transactions to building, management and exit to guide them through and leverage this very real-time opportunity, whilst operators in these industries will also need to manage costs, their portfolios and liabilities.”
In 2024, the top alternatives were determined to be Automotive & Roadside, followed by Dentists, Vets, Labs, Drive Thrus and Self Storage.
In 2025, the top Alternatives are Affordable Housing, BTR, Data Centres, Renewables and Infrastructure as well as the previous picks of Dentists, Self-Storage and Vets.
The continued interest in flexible, hybrid and home working will also continue to positively impact the Flex sectors, food stores (in particular convenience), Drive Thrus and Self-Storage in addition to high street dental and vet services, the latter two also benefitting from a retained demand for Health and Wellbeing services whilst Care Homes and Labs continue to perform.
Alternatives also offer conversion opportunities for those with an appetite to undertake asset management with obsolete offices and car dealerships being transformed into housing, care homes and flex assets. Rapleys also notes that even heritage buildings have been repurposed for data centre use.
Rebecca Harper, Head of investment at Rapleys and Scott Mitchell, Partner in Investment, added:
“The reality is that investors are looking for returns that do not currently widely exist in the traditional real estate market unless there is significant work to be done and, in particular, overseas investors do not have the appetite to get involved with large scale asset management, conversion or refurb works, meaning they are at the moment investing only in these classes via platforms that can run the works for them. However, alternatives opens up a whole new raft of income and opportunities that, with the right advice, will deliver double digit returns over three, five and 10 year horizons. For Dentists, Vets and Self Storage returns are already there in the three to five years, whilst Affordable Housing and BTR represent longer returns.”
