A look ahead: Aberdeen Asset Management

When it comes to private real estate investing, Kate Giordano, Americas head of Aberdeen Asset Management’s multi-manager arm, tends to follow the demographic trends.

One major demographic change that she sees driving US real estate investment activity in 2017 is the rise of Millennials coming into the workforce and seeking rental housing, as homeownership rates have been declining in the face of tighter lending practices by mortgage providers. Giordano noted that while there have been a lot of deliveries of new apartments in certain markets, construction has been concentrated in higher-end Class A properties.

“There’s still an affordability gap for renters that want to live in markets like New York or San Francisco, but if you’re unable to qualify for a mortgage and the new supply of Class A apartments is out of your reach, then you’re in the Class B market,” she said. “We’re looking at strategies where managers are taking properties [that] are a B-minus and taking them to a B-plus, so they push rents up a little but still within reach of renters that can’t afford Class A properties.”

At the same time, the aging Baby Boomer generation also has Aberdeen looking at investment opportunities in assisted living properties. “With assisted living, the average age of the occupants is around 82, so we still have a long way to go before the Boomer generation as a whole really needs the services of those places,” said Giordano. “So we’re looking to build out those portfolios now as the opportunity grows over the next decade.”

Location is key, however, and Aberdeen will be focusing particularly on properties located in communities with high income levels, since those areas tend to have more private-pay facilities, which will be less susceptible to any potential changes in US healthcare policy under the new incoming president.

The firm also is looking for assisted-living facilities with a memory care or dementia care component. “Unfortunately, there’s an increasing need for that kind of care, so you want to have some level of that in the same assisted living facility,” Giordano said. “That makes the properties more versatile and relevant, given the needs of people today.”