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 with specialist housing leading the way.
The strategic property consultancy’s latest report into alternative real estate industries showcases 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.
In what has been – and continues to be – a challenging UK market characterised by longer than anticipated inflation and higher interest rates, many institutional and overseas investors have paused decision making yet have capital to spend whether there are added value opportunities with income streams at the same time. The Rapleys report cites the performance of various industries that have strong underlying fundamentals, labelling the living and healthcare sectors as the most opportunistic.
Purpose-built student accommodation (PBSA), affordable housing, Build to Rent, and Care & Retirement have all seen strong demand and rental growth that is set to continue over the next three years. In addition, government supported sectors like affordable housing – where strong rhetoric of support, increased funding and positive planning decisions have recently been made – has commanded the spotlight.
For PBSA, a renewed interest by international students was deemed to be a top opportunity – with Trump’s policies turning students away from studying in North America, with the UK set to be a beneficiary.
In 2024, the top alternatives were determined to be Automotive & Roadside, followed by Dentists, Vets, Labs, Drive Thrus and Self Storage. In 2025, PBSA is expected to do well.
Investors from overseas – in particular from North America, Japan, Hong Kong and Singapore – are focussed on long-term secure income via the UK real estate market, thanks to domestic economic and geopolitical disruption. Housing, with its strong fundamentals, is set to attract a significant proportion of this capital.
“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.
“Whilst Build to Rent was one of the higher performing niche sectors in our 2024 report, the outlook for more housing sectors has changed positively in 2025 with Affordable Housing in particular predicted to have a big turn around in its outlook thanks to recent policy changes and the Spending Review.”
Angus Irvine, Head of Living, Rapleys
For Affordable Housing, Rapleys’ report highlights the core opportunities driving the sector’s positive outlook including the Govt’s laser focus on delivery, demand from local authorities to alleviate temporary housing pressure, the opportunity for funds to acquire s106 units, the increase in ‘for profit’ registered providers and the elimination of the viability challenge on grey belt sites in the latest NPPF.
“The outlook for all types of housing is extremely positive but challenges remain and there is more the Government could do to accelerate delivery and attract private investment further.
“We would like to see housing classed as critical infrastructure for example, which would open up more finance routes, and incentivisation for investors would also leverage the existing opportunities further.”
Angus Irvine, Head of Living, Rapleys
