Not so long ago, investing in property almost always involved standard, residential buy-to-lets or the core kinds of commercial property such as offices and retail units. However, the past few years have seen a number of niche assets rise to prominence. Student property is perhaps the star of this group, but automotive property, care homes, hotel rooms, and other specialist assets have also grown significantly in popularity. So why are investors moving away from the mainstream and towards these formerly very niche asset types? There are a couple of main reasons behind this shift.
Investment is, of course, a way to make money. As such, it’s not surprising that money is one of the key factors at the root of the shift towards more specialist investments. Some of them are simply performing very well, and this has served to get more attention from investors. Student properties, in particular, have been named by major consultancy Knight Frank as the single best-performing type of asset in the UK in recent years, amidst high demand from rising student numbers and short supply.
With the market already undersupplied and intake caps being abandoned, it may look like you can’t go wrong with student property in particular. This is certainly an idea that the companies selling the investments try to encourage. While many investors are finding their assets seem to back up this idea, if you invest in student property don’t skimp on due diligence. Despite short supply students are becoming more discerning. Developments that don’t have a particularly good location, in particular, are still more than capable of turning in a disappointing performance.
Once again, investment is essentially a way to make money. But there is, of course, one factor that prevents investors from just buying up all the assets which promise the very highest returns and that is risk. Many investors are pursuing niche property assets in the pursuit of one of the key ways to mitigate risk; diversity.
Many niche, specialist property assets do not follow the trends of the mainstream property market particularly closely. Demand for traditional buy-to-lets or commercial space is not particularly closely tied to student numbers, the tourist trade, or the demand for care homes to house the UK’s ageing population. This means that investors, especially those who have always specialised in property and don’t want to step outside of their comfort zones, can spread the risk by picking up these specialist assets. If their mainstream buy-to-lets are hit by falling values or reduced demand, niche property assets that are more-or-less independent of these trends could add important buoyancy.