Formerly Niche Asset Classes Emerge As Institutional Favorites In Volatile Market

As historically preferred property types like offices lose value, specialized asset classes are stepping into the spotlight.

Formerly niche sectors like data centers, manufactured housing, marinas and cold storage are gaining ground as prime investment targets, snagging billions of dollars and reshaping the fundraising landscape. 

“If you go back five years, I don't think many of those sectors were on people's radar,” said Michael Stark, a PJT Park Hill partner and co-head of its real estate group.

Niche asset classes could account for between 50% and 70% of CRE portfolio values by 2034, Deloitte predicted this spring. 

Some of that is spurred by a tough economy and capital environment. Agora's 2025 real estate sentiment report found that 44% of firms have changed their investment plans because of market volatility. 

A rising generation of investors could also be fueling a shift. Deloitte found that executives younger than 40 are 10% more likely to invest in alternative property types than their older counterparts.

Stark said lowered interest rates could help further open investors to new strategies. Most respondents to Agora’s survey expect the market’s volatility could continue for another year. 

Firms that have adjusted strategies almost exclusively either moved into new property types or targeted new regions, Agora said. Multifamily and mixed-use were the top two choices among asset classes, while the Southeast and Southwest were leading new activity.

As a global placement agent, Park Hill is advising clients on these types of adjustments. It will make suggestions for investments based on compelling supply-demand imbalances or a group's unique operational expertise. 

“Sometimes those bring us to sectors that are less institutionalized, or in the process of becoming more institutionalized but maybe somewhat less established,” Stark said.

Investor liquidity is a big portion of what is constraining the market, Stark said. About 58% of investors are having trouble raising funds, Agora found.

Investors who make one new commitment a year are less likely to try an emerging sector, while those with more liquidity can construct their portfolios more aggressively. Deals from CRE's giants, like Blackstone's $5.7B acquisition of Safe Harbor Marinas or Brookfield's $10B purchase of manufactured housing specialist Yes Communities, underscore how deep the shift to alternatives is among those with the funds to be choosy.

“The folks who can raise money have a strategy but also have actual deal flow that they can present to a potential investor,” Stark said. 

The ability to show investors a ready-made deal raises the bar for platforms that can raise money, he said. It is a big advantage over an emerging group that is searching for deals and capital at the same time. 

“That approach is more challenging in this environment than it probably has been in a long time,” Stark said.

While there are parallels between different niches and transferable skill sets, relationships remain the most important element of success. And those take time to build. 

Investors need proven operators to succeed, and Stark said that sometimes means building, developing or hiring people with unique expertise in the formerly niche categories. 

“You're buying hard assets, but there's an operating element to them that requires a unique and differentiated skill set,” Stark said.