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As 2025 enters its final quarter, the slowdown in traditional commercial real estate shows little sign of easing. Office vacancies remain elevated in most major metros, and retail is facing yet another round of restructuring as consumer habits shift.
Against that backdrop, investors are rethinking what qualifies as a core holding. Attention is turning toward a new group of asset classes that once sat on the edge of the market – smaller, more specialized sectors that promise steadier returns and less exposure to the ups and downs of the broader economy.
Data centers, small-bay industrial buildings, outdoor storage, and car wash chains may not have the glamour of landmark office towers, but they’re attracting fresh capital from family offices and private funds looking for stability in an uncertain economy.
Caution and Opportunity
After several years of rising interest rates and limited deal flow, investors are still sitting on significant amounts of undeployed capital. That “dry powder” is now being directed toward properties that generate predictable cash flow and serve clear, long-term needs.
Ken Jacobsmeyer of Marcus & Millichap says he’s seeing less appetite for large portfolio acquisitions and more for individual, carefully underwritten deals. “Private-equity-backed brands like quick-service restaurants and car washes expanded aggressively a few years ago,” he explains. “Now some of those operators are struggling to meet rent and sales targets. But buyers are being selective, looking for strong local operators or one-off assets that stand on their own numbers.”
The same dynamic applies to industrial and logistics properties. Investors are gravitating toward smaller, flexible spaces that serve a range of tenants, from e-commerce distributors and local manufacturers to contractors and repair businesses. These buildings typically span 10,000 to 50,000 square feet, feature drive-in access and modest office components, and can be easily reconfigured for new tenants. Demand is strongest around major population centers where last-mile delivery remains a growth engine and where aging industrial stock no longer meets modern logistics needs.
Selective Buyers, Sharper Focus
The investors who are most active in today’s market aren’t large institutions – they’re smaller, more flexible players. Family offices, private equity firms, and high-net-worth investors are taking the lead as traditional capital sources remain cautious.
Sean Sedaghatpour of Elisheva Realty in New York says these groups are stepping in as liquidity slowly returns. “As lenders open up, more investors are entering the market,” he says. “Family offices and private investors are participating, but the overall market isn’t strong enough yet to attract broad interest across every property type.”
Family offices, in particular, are well positioned for this moment. They tend to invest their own money, operate on longer timelines, and can make quick decisions without layers of approval. Private equity funds are also reentering, though selectively, targeting sectors with clear demand drivers such as logistics, data infrastructure, and specialized industrial assets. Both groups are looking for reliable income streams and opportunities to buy quality assets at more realistic pricing.
This shift toward private capital has broadened the definition of diversification. Instead of spreading risk across the same traditional sectors, these investors are exploring new corners of the market, areas once considered too small or specialized to attract institutional attention.
Alternative Sectors Emerge
The shift toward private capital is also reshaping what kinds of assets get attention. With institutional buyers on hold, smaller investors are exploring areas of the market that once fell outside the mainstream. Reagan Pratt of DePaul University’s Real Estate Center says these sectors are no longer fringe plays. “Investors are being forced to look beyond the traditional asset mix,” he notes. “With fewer large transactions closing, many managers are exploring specialized assets that can still provide scale over time.”
Data centers have become one of the clearest examples of this shift. Global demand for computing capacity – driven by cloud infrastructure, streaming services, and artificial intelligence – has filled data centers faster than new facilities can be built. Investors are targeting power-dense facilities with advanced cooling systems, redundant energy supply, and long-term leases to creditworthy corporate tenants. Many of these properties occupy repurposed industrial sites near major data corridors where access to power and fiber networks is crucial.
Outdoor storage and small-bay industrial properties have followed similar trajectories. Outdoor storage sites typically house contractor equipment, delivery fleets, or construction materials – assets that require secure land and proximity to highways but minimal structures. Whereas small-bay industrial complexes, often built in clusters, accommodate tenants in e-commerce, trades, or light manufacturing. They generate steady rent through short- to medium-term leases and relatively low upkeep costs. “These assets may not look glamorous,” Pratt says, “but they offer consistent occupancy and predictable rent growth. In a market defined by volatility, that’s valuable.”
A Market Redefined
The move toward smaller, steadier assets may signal more than a temporary adjustment. It’s beginning to redefine what counts as “core” real estate. Instead of waiting for a broad rebound, investors are reshaping portfolios around predictable income, manageable risk, and long-term relevance.
Jacobsmeyer says the tone of the market feels different this time. “There’s a lot more focus on fundamentals now,” he notes. “People are less interested in chasing appreciation and more focused on steady, well-run assets that can weather rate changes or shifts in consumer spending.”
As capital slowly returns, properties that once sat outside institutional strategies – from data centers and small-bay industrial parks to outdoor storage and specialized logistics hubs – are moving toward the center. What connects them isn’t size or prestige but reliability: stable cash flow, operational efficiency, and clear utility in how people and businesses now live and work.
If that discipline holds, the next phase of real estate investment may not be about recovery at all, but about redefinition – a market built less on speculation and more on performance, one smaller deal at a time.