The rise of operational real estate – how to handle complexity in resurgent asset class
The real estate investment landscape has undergone a profound transformation over the past decade.
Where once investors were content with traditional underlying assets - primarily office buildings, retail centres, and residential developments - economic volatility and sustained high interest rates are impacting investor demand and driving them to alternative investments.
Operational real estate, or OpRE, sits at the heart of this shift, representing one of the most compelling and dynamic investment themes in modern alternative asset management.
Defining OpRE
Operational real estate has existed as an asset class for decades, but it has gained significant traction as a distinct institutional investment category in the last 10 years. Referring to assets whose value is intrinsically tied to the performance of an underlying business or service, rather than simply the physical structure or its location, OpRE assets generate returns through the direct delivery of services and the management of operations, rather than solely from the income paid from tenants.
The sectors that fall under the OpRE umbrella are diverse and growing. Healthcare facilities - including hospitals, medical office buildings, and senior living communities - represent a significant portion of the space. Hospitality assets such as hotels and serviced apartments are classic examples, as are self-storage facilities, student housing, data centres, life sciences campuses, and logistics hubs. They all share one distinct thing in common: the real estate cannot be separated from the business it supports. The building and the operation are, in effect, one.
Why OpRE is gaining momentum
The rise of OpRE is being driven by structural, demographic, and macroeconomic forces that are reshaping how capital is deployed across global real estate markets.
Institutional investors are increasingly seeking assets that offer both income stability and growth potential. While traditional real estate continues to play a role in portfolios, it has faced headwinds from rising interest rates, shifting work patterns, and higher regulatory requirements. This is driving institutional investors away from traditional, passive leases, and towards OpRE, which by contrast offers exposure to sectors with strong demand fundamentals and the potential for operational upside.
Key trends in OpRE include the aging population across developed markets which is driving demand for senior living facilities, assisted care communities, and healthcare infrastructure as baby boomers move into retirement age. Similarly, urbanization trends and the growth of younger, mobile populations are fuelling demand for student housing, co-living spaces, and flexible hospitality concepts - all firmly within the OpRE spectrum.
Meanwhile, the explosion of data consumption and cloud computing has elevated data centres to become one of the most sought-after OpRE asset classes globally. These facilities are not passive structures; they require sophisticated operational management, continuous power supply, and advanced cooling systems. Their value is entirely dependent on operational excellence, and as artificial intelligence, streaming, and digital commerce continue to expand, demand for data centre capacity shows no signs of abating.
Life sciences campuses represent another technology-driven OpRE growth story. The post-pandemic surge in biotech and pharmaceutical research has created acute demand for specialized laboratory and research facilities that require active management and highly specific infrastructure. These are assets that simply cannot function without operational expertise.
Administrative complexities in OpRE operations - and how to solve them
For managers, operational real estate requires another layer of specialization within internal operations teams. Managing multiple asset types - each with distinct regulatory requirements, reporting obligations, investor structures, and cash flow profiles - creates considerable complexity.
Teams must navigate multi-jurisdictional compliance, complex fee calculations, performance reporting across diverse operational metrics, and the reconciliation of business-level financials with real estate accounting standards. In-house teams must also manage a disparate information supply chain of third-party property managers and property accountants which can place significant administrative strain on operations teams. As portfolios scale, these demands can quickly overwhelm internal resources.
When these operational challenges go unaddressed, the consequences extend well beyond internal inefficiency. Delayed or inaccurate performance statements erode investor confidence at a time when transparency and timeliness are increasingly non-negotiable expectations. Investors making capital allocation decisions rely on accurate, timely reporting - and repeated delays can signal deeper operational weaknesses, prompting increased due diligence, redemption pressure, or reputational damage that outlasts any single reporting cycle.
Beyond investor relations, unresolved data and reconciliation gaps between property-level accounting and fund-level financials can lead to compliance breaches across multiple jurisdictions, exposing managers to regulatory scrutiny, fines, or restatements.
An experienced external provider can help managers avoid such outcomes by bringing dedicated infrastructure, specialist expertise, and scalable technology to absorb this administrative burden. By outsourcing third party data retrieval, asset review, fund administration, accounting, and reporting functions to specialists with subject matter expertise and asset class experience, in-house operations teams can refocus on asset management and value creation - where their expertise truly matters - rather than spending resources on operational tasks.
The Citco group of companies (Citco) operates as a true partner to funds in the OpRE market, using our extensive data services proposition to provide bespoke reporting and data insights to managers to enable them to function more effectively. Our team of experts are here to support managers so they can continue to effectively scale their own businesses.