By Christopher Merrill
When Harrison Street started in 2005, alternative real estate was largely viewed as a collection of specialized sectors outside the four traditional property types of office, multifamily, retail and industrial.
Few, if any, investors historically operated with a true pure-play focus on the alternative space. In a sense, we helped define the alternative real estate market as it is understood today — by championing overlooked, but demographically essential, property sectors that have since become an important and growing part of institutional portfolios.
Our view was different. We believed that real estate tied to durable demographics and needs-based demand would ultimately prove more resilient and scalable than many expected.
From the outset, we decided to focus where others were not — on underfollowed asset classes supported by strong long-term fundamentals. More than 20 years later, the definition of alternatives has expanded alongside broader institutional acceptance. The biggest change has not been in the sectors themselves, but in investor perception and demand. We have seen that many sectors once considered niche — including student housing, senior housing, self-storage and data centers — are now viewed as core components of diversified real estate portfolios, reflecting their resilience and long-term cash flow characteristics.
Early conviction
Launching Harrison Street was rooted in our conviction in the fundamentals of specialized alternative sectors and a willingness to invest early.Before founding our firm, I had the opportunity to build an investment platform in less mature markets, including one of the first institutional funds focused on Central Europe. That experience reinforced in me the value of innovation and first-mover thinking. We believed that same advantage could be applied to alternatives.
Our thesis was to focus on areas where institutional capital had not yet fully engaged, but where underlying demand drivers were already compelling. In practice, being early often proved less risky than it appeared. In sectors with limited competition, there was more room for selectivity, stronger positioning and the ability to build expertise ahead of broader market participation.
Durable demand
Across the alternative real estate spectrum, a number of sectors benefit from long-term demographic and societal trends, including aging populations, enrollment growth and the expansion of digital infrastructure. These are not short-term themes. They are meaningful opportunities shaped by durable patterns of demand and tied to essential, recurring needs.
Importantly, the assets within these underfollowed sectors suffered not from weak fundamentals but from institutional inattention. They were fragmented and operationally intensive, often lacking the historical data sets on which managers typically rely. While those complexities were a barrier to broader investment interest, they also created an opportunity for investors willing to develop the platforms, expertise and processes needed to institutionalize the assets.
That is why the most compelling opportunities do not always fit neatly into a single sector or capital bucket. The ability to evaluate potential investments across a range of real estate and infrastructure markets, equity and debt structures, and operating models has become an increasingly important advantage. Long-standing partnerships with experienced operators also support our value-creation strategy, resulting in an integrated platform that has become one of our defining strengths.
Cycle tested
Our early thesis was reinforced during the global financial crisis, which served as a real-world stress test. While no asset class is immune to disruption, demand across sectors such as student housing, senior housing and healthcare remained relatively stable. In many cases, shorter-duration leases also allowed for faster repricing as conditions evolved.
That resilience helped demonstrate why these sectors deserve broader institutional attention. Over time, many investors came to see that alternative real estate could offer durability through a range of environments, not despite its specialization, but because of the essential and recurring nature of the demand supporting it.
Data, discipline and underwriting edge
We have consistently focused on three factors: durable demand, supply discipline and strong operating fundamentals. Those principles shaped the early thesis and remain central to our approach today.
Over time, we also strengthened our underwriting through a proprietary risk-scoring methodology designed specifically for fragmented alternative asset classes.
Combined with one of the largest datasets of transactions and dispositions in these sectors, we believe that approach has provided a meaningful informational advantage in assessing risk, identifying opportunities and supporting consistent performance. In less transparent markets, having a differentiated view of relative risk can be as important as identifying the opportunity itself.
Operators matter — but so does platform
Alternative investing is often described as highly operator dependent. Operators are certainly a critical component of success, but they are only one part of a broader investment framework. Success requires a combination of strong operators and a specialized investment platform capable of identifying opportunities, structuring investments and actively managing risk across the lifecycle.
The approach has centered on partnering with experienced operators while building deep in-house expertise across sectors, markets and capital structures. These relationships are a defining strength of the platform. Combined with integrated capabilities and proprietary data, they provide a differentiated perspective and durable competitive advantage.
How alternatives became institutional
There was not a single inflection point when alternative sectors suddenly became institutional so much as a steady progression over two decades as they matured and demonstrated their ability to perform across a range of market cycles and events, including the GFC, the COVID-19 pandemic, inflationary periods, times of rising interest rates, valuation resets, and other dislocations. Early on, much of our work involved educating investors on why these sectors belonged in institutional portfolios at all. As institutional-quality operators emerged, transaction volumes increased, research coverage expanded and performance data became more robust, investors gained greater confidence in the durability and risk-adjusted performance characteristics of these asset classes.
Looking beyond labels
As institutional investors expand their horizons beyond the more traditional real estate sectors, the “alternative” label has become less relevant. Twenty years ago, the question we often heard from investors was, “Why should I invest in these sectors at all?” Today, the question is more often, “What role should these sectors play in my portfolio, and how do I gain exposure at scale?”
That shift says a great deal about how the market has evolved. Investor conversations have moved past rigidly classifying strategies, toward a focus on the characteristics that drive long-term performance.
Discussions today are increasingly centered on demand durability, cash flow growth, inflation protection, diversification benefits and how a particular investment contributes to broader portfolio objectives. While categories remain relevant, investors are spending more time evaluating the underlying fundamentals and the role an asset plays within a portfolio than the label attached to it.
Separating durability from hype
One of the most important distinctions in specialized real estate is whether demand is being created by a long-term structural shift or by a temporary surge in investor enthusiasm. Durable sectors tend to benefit from demographic, technological or societal changes that unfold over decades, while trends often attract capital faster than fundamentals can support.
The most durable sectors are typically anchored by long-term structural demand that persists through multiple economic cycles. They address essential human or economic needs rather than temporary consumer preferences. We look for sectors where demand is measurable, recurring and difficult to displace, supported by supply dynamics that remain disciplined over time.
When investment activity accelerates faster than underlying demand can support, risk tends to follow. Ultimately, successful specialized real estate investing requires patience, discipline and a long-term perspective focused on what is likely to remain essential decades from now, not simply what is attracting attention today.
We had early conviction in alternatives, and it’s rewarding to see that conviction is now shared by an ever-increasing number of institutional investors.
Christopher Merrill is co-founder and global CEO of Harrison Street Asset Management.
*Originally published in Institutional Real Estate, Inc. (IREI) Americas
