The shift toward alternatives is already underway
Alternative property types—data centers, cell towers, life sciences, health care, self-storage facilities, single family rentals, senior housing, and student housing, among others—are pushing some real estate leaders to realign their long-held portfolio construction proclivities. Alternatives have grown at a 10% CAGR, from US$67 billion in 2000 to more than US$600 billion by 2024.3 Alternatives have also outperformed traditional properties over the past decade, achieving 11.6% annualized returns compared to 6.2% for traditional property types.4
Public real estate investment trusts (REITs) have spearheaded the adoption of alternatives, enabling access to a wide range of real estate assets while the private real estate market has approached allocations with more caution. REITs have increased their allocation to alternatives in the public markets, rising from 26% in 2000 to over 50% in 2024.5 Meanwhile, the original NCREIF Fund Index—Open End Diversified Core Equity (ODCE), an index of 25 private funds—did respond to the growing demand for some alternative types following the pandemic by adding these asset classes to the index, but core property types still make up more than 90% of the total value (figure 2).6
