Niche Assets from our Developer & Owner Database
21 weird types of real estate assets we've come across and how each might form the core of an investment strategy
We’ve now been building the Thesis Driven Developer & Owner Database for the past 18 months. In that time we’ve documented over 6,400 real estate owners and 20,000 executives as well as manually reviewed over 100,000 distinct real estate assets.
Across those assets, we’ve found some pretty odd examples of niche strategies at work. In a world where real estate investors are increasingly looking for riches in the niches, we’ve leveraged our database to help real estate sponsors and entrepreneurs find those unique and specialized opportunties.
Today’s letter will tackle 21 separate unique real estate assets across multifamily, retail, industrial, commercial and more. Not all of them will make sense, but we’ll at least take a crack at how each might form the basis of a niche strategy.
And if you’d like to subscribe to the developer database—which includes details of the areas of focus (markets and sectors) as well as executive contact info for over 6,000 developers—you can use the code TD2024 for 20% off!
Let’s get to it:
Churches
Example asset: Trinity Church by Leggat McCall
Market forces typically do not lead developers to build churches in a country with rapidly declining church membership and attendance. But churches and other religious institutions do own lots of prime land and often have significant influence over local governments and elected officials. So striking a deal with a religious group to build a shiny new facility (or improve an existing facility) might make sense as part of a bigger real estate vision.
Some jurisdictions—such as New York City—also give FAR bonuses to real estate developments that include a “community facility” use such as a house of worship. So building a church might make more sense than it initially appears.
Teachers Villages
Example asset: Newark Teachers Village by RBH Group
“Teachers Villages” are really just a subset of workforce housing with some features and amenities tailored to a specific profession. While they’re not actually exclusive to any one profession, the messaging—providing teachers and other working professionals with much-needed housing—resonates in expensive markets.
Funeral Homes
Example: Pinnacle Funeral portfolio
With the Baby Boomer generating aging, demand for funeral homes is expected to increase over the coming decades, and the funeral industry has become a growing private equity target. Funeral homes are somewhat niche assets, often occupying retail space but with some unique physical traits—and, often, design—that make them challenging to repurpose for other retail uses. Therefore, funeral homes are often developed and owned by dedicated investment firms if not owner-operators themselves.
Biomanufacturing Plants
Example asset: Jefferson Technology Park by Trammell Crow
Biomanufacturing involves using biological processes—such as fermentation—to make things. Industrial chemicals, medicines, and some food and beverage items can be created through biomanufacturing processes, which often require large vats, tanks, and fine temperature control.
While small-scale biomanufacturing often exists alongside life science properties, larger biomanufacturing facilities are effectively industrial properties, making them a bit of a hybrid of two popular asset classes.
Car Condos
Example asset: M1 Concourse
We did a deep dive on the collectible automotive real estate business last year. Many companies in the sector—whether membership, rental, or condo-based—are benefitting from the growth of the collectible car segment as well as a desire for community and a ‘third place’ among collectors.
Larger investors—led by Hagerty—are beginning to take serious interest in the space, so car-oriented clubs are likelier than one might think to reach meaningful scale in the next decade.
Film Studios
Example Asset: Sunset Bronson Studios by Hudson Pacific Properties
We wrote about the rise of sound stages in a Thesis Driven letter earlier this year. Sound stages—and entertainment production studios writ large—have benefitted tremendously from the rise of on-demand content which has increased the need for production space.
While film studios share some traits with industrial properties—and are often lumped within the industrial category—they have higher fit-out costs and and completely separate leasing market from the broader industrial sector.
Dude Ranches
Example Asset: Westgate River Ranch by Westgate Resorts
Originally working cattle ranches, many dude ranches have evolved into vacation destinations providing horseback riding, fishing, hiking, and other outdoor activities. While some real estate entrepreneurs find them attractive, they tend to suffer from the high operating expense problems of other sub-scale hospitality businesses.
Gun Ranges
Example asset: Chesterfield County Range by JRA Real Estate
About a third of Americans own guns, and the consumer market for shooting ranges is expected to grow more than 7% year-over-year through 2030. These ranges can be lucrative entertainment and training properties with limited up-front capex required, although investments in shooting ranges may run afoul of some institutional LPs’ restrictions.
Residential Airparks
Example asset: Patriot Airpark
Why drive to your house when you can fly? Fly-in residential developments (residential airparks) are directly accessible to small planes via a landing strip, allowing a pilot to directly taxi into their own garage.
While very cool, residential airparks cater to a very specific and niche consumer—only 167,000 Americans hold a private pilot’s license—so we don’t see them “taking off” any time soon.
Child Care Centers
Example asset: The Creamery by Hollander Development
Thesis Driven guest writer Mark Munro did a deep dive into child care real estate earlier this year. As the percentage of dual-income couples with young children rises, demand for child care space grows. But local zoning restrictions and state child care regulations limit suitable properties for early childhood education (ECE) operators. In addition to rules around outdoor space and child-to-staff ratios, many jurisdictions severely limit where centers can be located, often requiring conditional use permits or prohibiting them outright in certain zones.
Developers may find that childcare space is not just attractive in its own right as a real estate asset but serves as a great amenity for nearby residents and office tenants alike.
Radiopharmaceutical Plants
Example asset: Indianapolis site by Novartis
Advances in nuclear medicine and imaging have dramatically increased demand for radiopharmaceuticals, or drugs that include radioactive isotopes. As one might imagine, manufacturing these substances requires very specialized real estate built in compliance with strict regulatory requirements including shielding, air filtration systems, and secure waste management.
While these facilities have a high permitting barrier and even higher capex requirements, they’re irreplaceable assets highly in demand by pharmaceutical manufacturers and healthcare companies.
Marinas
Example asset: St. Augustine Shipyard by Robert Finvarb Companies
With limited new supply and growing demand, marinas are another trendy real estate investment sector. They typically generate revenue through slip rentals, boat storage, maintenance services, and amenities like fuel, electricity, and water hookups, and they’re often—but not always—located alongside hospitality and high-end residential developments in tourist-friendly areas.
Building new marinas can be difficult from a permitting standpoint, particularly in states with strong environmental laws and coastal protections. In those places, existing marinas can be value-add development targets.
RV Parks
Example asset: Thousand Trails by Equity Lifestyle Properties
With minimal up-front capex needed, strong yield potential, and little institutional competition, RV parks are a trendy investment target for small real estate investors. These parks offer spaces for short-term or long-term stays, catering to the growing popularity of RV travel and tourism.
The business model typically includes renting out plots with basic amenities like water, electricity, and sewer hookups, while premium services such as Wi-Fi, recreational facilities, and community spaces can attract higher-paying guests.
Event Venues
Example asset: UBS Arena by Oak View Group
There are a wide range of assets that could fall into the “event venues” category from repurposed office space at the low end to the stadiums and arenas in Oak View’s portfolio on the high end. While the event venues market has been thrashy and unpredictable over the past few years, venues can be an anchor for bigger placemaking real estate developments and a way to earn goodwill with local officials.
Industrial Outdoor Storage (or Truck Parking)
Example: Zenith portfolio
Industrial outdoor storage (IOS) is one of the trendiest real estate asset sectors in today’s market. It refers to large outdoor spaces used to store equipment and materials related to logistics and industrial operations such as trucks and machinery. These storage areas are typically located near factories, warehouses, or distribution centers and are used for items that don't require indoor protection.
IOS is attractive because it requires limited up-front capex and can be underwritten on either a cash flow / yield basis or as a covered land play.
Timberland
Example: Timberland Investment Group
Like farmland, timberland is appealing to investors who like generating some cash flow while holding land—whether as a defensive strategy or a covered land play.
Most timberland investments are held in either REITs or private investment vehicles managed by special investment management vehicles known as TIMOs.
Historic Tax Credit Development
Example asset: Bigelow Square by Kenney Development Company
As we discussed in a deep dive last year, historic tax credit development remains a bastion of small-scale, local real estate investors, as the relatively small scale of individual projects—and the uniqueness of each project—make it difficult for institutional players.
But for smaller real estate investors with a love for historic structures—as a high tolerance for unpredictability—historic tax credit development can be a lucrative business as federal and state tax credits can offset a significant portion of construction costs.
Multigenerational Housing
Example asset: Urban townhomes by Urban Pacific
Urban Pacific founder Scott Choppin sat down for a Thesis Driven interview earlier this year to explain how building for multi-generational families have supercharged his development business.
Multigenerational housing is “two or more related generations of adults living under the same rooftop.” Typically, this includes some combination of children, parents, grandparents, or other relatives of the parents. Often, it means three related generations. Multigenerational households are common among immigrant families, and the need is underserved in today’s housing market.
Sober Housing
Example asset: Sunrise Ridge by NewLife
Sober living homes offer a bridge between rehab programs and independent living for individuals recovering from substance abuse. Sober homes can vary in size and amenities, from basic shared accommodations to more upscale, private living spaces.
In many cases, sober living homes are simply repurposed single-family residences receiving protection from zoning laws by the Fair Housing Act. This can limit the up-front capex required to get a sober living business off the ground.
Cell Tower Leases
Example: SBA Communications portfolio
The cell tower real estate development business involves leasing or owning land for the construction and operation of telecommunications towers. These towers are essential for wireless communication, including 5G networks, and generate revenue by renting space to carriers like AT&T, Verizon, and T-Mobile.
Property owners can earn income through ground leases or tower companies may acquire land to build infrastructure. The business is capital-intensive, requiring regulatory approval, construction expertise, and long-term leases with telecom operators. Growth is driven by increased demand for wireless coverage and data capacity.
FBOs
Example asset: Opa-Locka FBO by Fontainebleau
Fixed-Base Operators (FBO) provide ground services for general aviation at airports including fueling, hangar space, aircraft maintenance, and amenities like lounges and flight planning for pilots and passengers.
With private flying on the rise—the number of pilot certificates issued per year rose from 17,000 in 2016 to over 24,000 in 2020—the need for amenitized spaces tailored to private aviation alongside small airports is growing.
As real estate sponsors look for an edge—as investors try to find alpha wherever they can—niche sectors are likely to proliferate. Assets formerly lumped together will increasingly be split out into niche categories to better isolate high-performing sub-sectors and deliver real estate investors their preferred mix of return, risk, and check size. Identifying emerging niches early is one of the most tried-and-true ways to make money in real estate.
Remember to check out the Thesis Driven developer database—covering 42 sectors of real estate and over 6,000 developers— with the code TD2024 for 20% off.
—Brad Hargreaves