Published on Thursday, May 2, 2024
Access our latest property investment summary by completing the form below.
But the Q1 total largely depended on one big deal rather than more uniform growth among property types.
Sales volume for alternative sectors — medical office, mobile and manufactured, R&D, self-storage, student housing, age-restricted, cold storage, and data center — jumped 41% year over year in the first quarter of 2024, according to MSCI’s capital trends report for 2024 Q1.
It was a big relative win to the overall 16% year-over-year market decline. However, it was also heavily weighted on the merger of HealthPeak and Physicians Realty Trust in March, which lead to a 239% year-over-year change in medical office. Without that, the alternatives deal volume would have been down 17% year over year, roughly matching general market performance.
“The self-storage sector also benefited from portfolio deals in the quarter, posting a 4% increase in volume versus the first quarter of 2023,” they wrote. In the first quarter, sales volume of $1.6 billion was 17% higher than the average first quarter volumes over the last 10 years.
“Nearly 70% of sales in the first quarter of 2024 were attributed to these types of deals,” MSCI wrote. The firm continued to say that self-storage continued to be a sector where investors could create workable deals, even as cap rates are up nearly 1 percentage point since 2022.
Student housing had respectable growth of 22%, putting it slightly over the growth of all alternatives. R&D hit only 4% growth, though that seems stronger than self-storage’s 4% because it didn’t depend on a single large deal.
Four different property sectors had negative growth. The lightest loss was in mobile and manufactured housing, with -6% growth between the first quarter of 2023 and that of 2024. Cold storage felt a cold shoulder, falling by 10%.
Data center is an area that one might have expected to see heavy growth, given all the attention on artificial intelligence. However, it had the second largest drop of any sector, falling 56% year over year. MSCI wrote that the property type has generally benefited from “significant portfolio and entity-level transactions as many players in the space are institutional and public companies that have the means to purchase these properties in bulk transactions.” In the first quarters of 2022 and 2023, such sales were respectively 77% and 59%. It could be that current AI trends, like generative AI, have different requirements that would attract investment for construction.
The largest decline, 74%, was in age-restricted.
That said, data of quarterly deal volume from 2017 to the present showed two interesting patterns. One was some heavy volatility. A second: starting in 2020, there’s been an overall trend line of growth, both in absolute dollars and in the alternative properties share of overall CRE transactions. The first quarter of 2024 hit 15% — down from about 17% in 2023 Q3, but up from the roughly 10% in 2023 Q4.