Around 12.4bn sq ft of new real estate needs to be delivered globally in the next decade to meet growing demand for student accommodation, care homes and data centres, according to a new Impacts report from Savills.
The firm estimates that in the top three ‘alternative’ property sectors, an additional 17 million care home beds, 18 million PBSA beds and 110,000MW of data centre capacity – which equates to circa 12.4bn of real estate space – would be required by 2033 to keep pace with demand.
Savills identified China and India as key markets for data centre growth and PBSA, alongside Japan, South Korea, and Australia, with demand for care home beds over the next decade likely to spike in South Korea, China, Australia, Canada, India and the US.
Marcus Roberts, head of Europe – operational capital markets at Savills, said: “These three sub-sectors have already seen significant investor interest. The average annual growth of investment into PBSA, care homes, and data centres globally was 17% over the last decade, while the average annual growth of total commercial real estate investment was around 7%, showing the underlying strong fundamentals of these asset classes.
“We know much more capital globally is looking to deploy into these markets, but this money is often stymied by a lack of portfolios that allow investment at scale. Our research today demonstrates the size of latent demand and boost confidence in the projects being brought forward.”
Eri Mitsostergiou, director in Savills World research team, added: “Largely unaffected by business cycles, these three alternative real estate sectors offer not only potentially high returns, but also the possibility to generate a positive ESG contribution – delivering senior housing that meets the needs of ageing populations, affordable student housing that supports the education of future generations, or investing in the technology to make data centres more energy efficient by capturing and reusing excess heat, for example.
“Not only that, but it’s implausible that the approximate 12bn sq ft of space required can come from new buildings: much of it is projected to be required in geographies that offer limited scope for new development and/or are implementing ‘retrofit first’ policies. Significant volumes of real estate will therefore need to be repurposed from other uses, thereby offering a further opportunity to improve the environmental performance of a meaningful number of assets and decrease carbon emissions.”
