Investment in Operational Real Estate (OPRE): Beyond Bricks and Mortar

Investors across Europe are increasingly adapting their strategies away from a focus on traditional or passive commercial real estate toward greater integration with operational real estate (OPRE). By investing in OPRE, they seek enhanced control over operational performance, improved returns and better risk diversification a trend that is showing no signs of losing any momentum.

Demand for OPRE on the rise

Investor appetite for OPRE is growing, but what exactly is it?

In the conventional real estate model, investors generate returns from rental income, whereas with OPRE, the value and returns are closely tied to the underlying business operations. In other words, performance is tied to the revenues derived from the real estate asset’s activities and business. Examples include hotels, data centres, student accommodation, PRS, senior living and self-storage facilities.

“OPRE is the operational element of the real estate asset. It involves the investors both owning the physical real estate and also running the day-to-day trading or operations of the asset – either directly or through a 3^rd party operator. This can include a wide variety of property types, from purpose-built student accommodation (PBSA) or a retirement home, right through to a data centre,” said Will Turner, Director – Fund & Corporate Services.

According to a survey of European real estate investors by Savills, allocators plan to deploy EUR 51 billion into European OPRE sectors over the next three years[1].

In addition, a further 56% told the same survey they expect the majority of their AUM will be invested in OPRE within three years[2]. OPRE is gaining traction in the UK as well, with a reported £9.6 billion worth of transactions taking place in 2024 alone[3].

OPRE is proving popular among investors for several reasons.

Firstly, there are performance and diversification benefits to investing in OPRE, at least relative to traditional real estate, where returns in once reliable sub-sectors such as office space and retail have taken a knock post-pandemic.

At the other end of the spectrum, competition for prime real estate assets, e.g. Grade A city office space, data centres, logistics, etc, is intensifying. As a result, many investors are looking to OPRE to achieve more attractive risk-adjusted returns and long-term value, recognising that operational real estate can offer diversified sources of income compared to traditional asset classes.

Although yields on OPRE vary depending on sub-sector, the returns are pretty solid, nonetheless. In the UK, Q1 2025 yields for healthcare-focused OPRE were in the region of 4.75%, while for hotels it was 7.5%-8.5%, and 8% for prime leisure[4].

OPRE is also seen as a decent hedge against inflation, according to Turner.

“OPRE can be an effective hedge against inflationary risk. In OPRE, investors benefit not only from rental income but also from the ongoing business operations associated with the asset. This means returns are more responsive to market conditions. For instance, when inflation increases operating costs, OPRE owners can often adjust pricing or charges for customers and users, helping to maintain value and income.

“In traditional real estate investment, this is harder as rents tend to be fixed for a proscribed period of time,” said Turner.

But OPRE is not without risks.

“Running an operational business can be significantly labour and cost intensive compared to traditional real estate investments because of the greater exposure to day-to-day operational challenges, whether that is interacting with tenants on a daily basis or dealing with on-site issues,” said Turner.

“There is also a higher risk of investors suffering from brand damage through their OPRE exposures. Unlike traditional property investments, OPRE assets are directly associated with businesses that interact daily with end-users, whether that’s residents, guests, or patients.

Any negative events, such as service failures, health and safety incidents, or poor customer experiences, can quickly lead to brand or reputational damage, which in turn may impact occupancy, revenues, and ultimately asset values. While OPRE offers the potential for higher returns, these closer links to operating businesses also introduce a broader set of risks for investors,” he adds.

Government policies, especially in the UK, are also piling pressure on OPRE strategies. This is because the asset class is more vulnerable than most to recent policy changes, particularly around the National Living Wage and Employer National Insurance Contributions.

Moving into the asset class

If investors are to navigate the idiosyncrasies of OPRE seamlessly, they need to think carefully about their choice of service provider. During the selection process, they must ensure their providers have the capabilities to handle complex corporate structures and operating models.

Managers need to engage with service providers who can support them with their various operational and regulatory compliance needs too, so that they focus their resources on generating returns, and building – and maintaining – client relationships.

JTC combines decades of experience with a deep understanding of real estate investment structures, including OPRE. From setup through to ongoing administration, JTC supports managers with their operations, compliance needs and investor reporting.

[1] Savills – June 3, 2025 – European OpRE Investor Survey Report

[2] Savills – June 3, 2025 – European OpRE Investor Survey Report

[3] CBRE – Operational Real Estate  Q1 2025

[4] CBRE – Operational Real Estate  Q1 2025