Is OpRE still alternative real estate?

For decades, institutional real estate investment followed a familiar playbook. Capital was largely deployed into offices, retail and logistics, with returns underpinned by long leases, rental growth and capital appreciation. The role of the investor (in simplified terms) was relatively straightforward: own the asset, collect the rent and oversee limited operational activity. 

Today, that model is evolving. A growing share of capital is being directed towards Operational Real Estate (OpRE) – a sector where investment performance is driven not only by the underlying tangible property, but also by the success of the operating business occupying it. 

As demand for these strategies grows, managers are exploring how to access new sources of capital, including defined contribution pension schemes, while adopting fund structures and operating models capable of supporting long-term growth. This article considers the factors driving the rise of OpRE, the potential impact of pension capital on the sector and why Jersey structures are increasingly being used to support these investment platforms.

Unlike traditional real estate, where returns are primarily derived from contractual rental income, OpRE links income and value creation to occupancy, customer demand, service delivery and operational execution. The traditional line in the sand between landlord and operator becomes increasingly blurred. Hotels are perhaps the most obvious example, but the investment universe extends much further and includes: 

• purpose-built student accommodation (PBSA) 
• build-to-rent (BTR) 
• hotels and leisure assets 
• healthcare, care homes and retirement living 
• self-storage and roadside assets 
• data centres and digital infrastructure 

In each case, investors gain exposure to both the underlying real estate and the operational performance of the asset. What was once regarded as "alternative real estate" has rapidly moved into the mainstream, as investors seek income growth, inflation resilience and exposure to long-term demographic and societal trends. 

Why investors are allocating more capital to OpRE 

Each of the OpRE sectors referenced above share a common structural theme. They are being driven by long-term structural and societal demands, against a backdrop of chronic undersupply. For example: 

• ageing populations (healthcare, senior living) 
• housing shortages (BTR) 
• global student mobility (PBSA) 
• experiential spending trends (hotels and leisure) 
• power consumption to support AI (data centres and digital infrastructure) 

In addition to these long-term demands facing modern society, investment blocks in the real estate space, such as pension funds and insurers, are increasingly focused on assets that deliver stable, recurring income, inflation linkage and long-duration cashflows. OpRE aligns well with these investment objectives. 

Another significant driver has been investor priority movements away from capital appreciation, towards income resilience. With the continued high cost of capital and economic volatility from global political shocks, OpRE is relatively well placed to tackle this environment. Many of the OpRE sector examples above provide managers with a degree of pricing power and flexibility. Hotel and leisure operators can re-price rates daily, PBSA rents can reset annually, and BTR operators can typically review rents at tenant lease renewal, enabling managers to adjust more rapidly to market conditions and inflation. 

How could DC pension funds influence OpRE growth? 

One of the most significant developments in UK private market space has been the 2025 Mansion House Accord (the Accord). As Defined Benefit (DB) pension schemes continue to de-risk and withdraw capital from illiquid real estate, managers up and down the country are optimistic that Defined Contribution (DC) pension schemes will become the natural replacement capital source - particularly in sectors such as OpRE, providing offer long-term income, inflation linkage and exposure to growth trends. 

Under the Accord, 17 of the largest workplace pension providers in the UK have committed to allocate: 

• at least 10% of their DC default funds to private markets by 2030 
• at least 5% of total DC default fund assets to UK private markets, subject to fiduciary duties and the availability of suitable investment opportunities 

While the Accord is not sector-specific, its focus on long-term private market investment is likely to accelerate capital flows into OpRE. In response, managers are building scalable investment platforms designed to meet the key requirements of DC pension schemes: stable long-term income, resilience through economic cycles, asset-backed downside protection and strong alignment with member outcomes. 

As we have discussed, OpRE, particularly BTR, PBSA, healthcare and certain infrastructure-like platforms, meet many of these criteria. It is therefore reasonable to assume that OpRE is well positioned to become a significant beneficiary of this DC capital allocation. 

In a recent article on hybrid and semi liquid funds, Tom Stevenson and I discussed the structural challenges the market is currently facing in its efforts to entice DC capital. In summary, traditional close-ended platforms as we know them are currently incompatible with DC scheme capital, owing to fee pressures and pricing demands. We believe that evergreen, scalable, semi-liquid and lower-cost platforms are likely to benefit most from the eagerly anticipated DC scheme investment into real estate, and Jersey, as a fund structuring jurisdiction, is well positioned to support this.  

Why are managers considering Jersey structures? 

The growth of OpRE has been accompanied by a shift towards platform investing, with institutions increasingly seeking operational scale rather than individual assets. Legal & General's build-to-rent platform, Greystar's student accommodation business and Octopus Real Estate's healthcare platform are all examples of high-profile real estate investment houses creating vertically integrated operating businesses, designed to capture both property and operational income streams. 

But these OpRE platforms aren’t just being launched by the mega-fund managers in the space. First time managers are also seeking ways to construct smaller scale platforms, and Jersey is often a viable jurisdiction of structuring for these managers – as Sophie Reguengo describes in a recent article on why investors are moving back to blind pool funds and using Jersey structures.  

For first-time managers in particular, the ability to outsource the operational infrastructure of a fund platform is often as important as the regulatory framework itself. Jersey’s ecosystem of experienced fund administrators gives managers the means to avoid the significant fixed cost of hiring and building internal fund operations teams and gives managers the ability to 'plug in' to that functionary's established operating model.  

Operating cost flexibility and “plug-in” access to state-of-the-art fund operations technology (think investor portals, document management and governance systems and financial reporting platforms), without suffering the cost of investment, are key drivers of this outsourcing model. But the benefits extend further than this.   

Highly regulated functionaries add an additional layer of operational robustness, established governance frameworks, processes and an institutional grade control environment (often independently overseen and recognised, for example ISAE 3402 assurance), and provide a clear segregation of duties between manager and those charged with fund governance. These are all institutional-grade attributes that any DC scheme is likely to demand from any platform in which they invest. 

How can Ogier Global help? 

As capital continues to flow into OpRE strategies, managers are balancing the need for operational scale, cost efficiency and strong governance. Outsourcing key fund operations can provide access to established infrastructure while allowing managers to remain focused on investment performance and growth. We also understand the structural and transactional demands of DC pension scheme capital, when launching real estate fund platforms .  

Ogier Global supports real estate fund managers with administration, governance and investor services across a range of structures. Our team works closely with Ogier’s real estate funds lawyers to support both emerging and established managers, helping them build operational frameworks that support long-term growth.  

If you would like to discuss the details of OpRE with our experts, get in touch with the team below.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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