Non-Core Sectors, Tokenization Redefining Real Estate Industry — Evening Brief – 05.05.25
Technology and market shifts are driving rapid changes in financial services, unlocking new growth and investment opportunities. Two key trends—non-core commercial real estate (CRE) sectors and blockchain-powered real estate tokenization—are reshaping the real estate investment landscape, offering innovative approaches to diversification, liquidity, and asset management, according to Deloitte’s 2025 Financial Services Industry Predictions.
Non-Core CRE Gains Momentum
Deloitte notes a significant pivot in CRE portfolios from traditional assets like offices, retail, industrial, and apartments toward alternative sectors. By 2034, alternative properties—such as data centers, cell towers, life sciences facilities, healthcare, self-storage, single-family rentals, senior housing, and student housing—are projected to account for nearly 70% of portfolio values, up from just over 40% today.
Since 2000, alternative assets have grown from $67 billion to over $600 billion in 2024, delivering 11.6% annualized returns compared to 6.2% for traditional properties. Public REITs have led this shift, boosting alternative allocations from 26% in 2000 to over 50% in 2024.
This transition is fueled by technological advancements (e.g., AI and 5G driving demand for data centers and cell towers), demographic trends (e.g., a projected 40 million people over 75 by 2040 increasing demand for senior housing and life sciences), and housing challenges. Younger real estate leaders, under 40, are also 10% more likely to prioritize alternative investments than older peers, reflecting a generational shift.
Tokenization: Revolutionizing Real Estate
Real estate tokenization, enabled by blockchain, is transforming assets into fractional, digital representations, creating new investment opportunities. Deloitte forecasts tokenized real estate to surge from under $300 billion in 2024 to $4 trillion by 2035, with a 27% compound annual growth rate. This includes tokenized private real estate funds ($1 trillion), tokenized loans and securitizations ($2.39 trillion), and tokenized undeveloped land and construction projects ($50 billion).
Tokenization tackles inefficiencies, high administrative costs, and limited retail investor access. Examples include Kin Capital’s planned $100 million tokenized real estate debt fund and T-RIZE Group’s $300 million tokenization of a 960-unit residential project in Canada.
Deloitte advises investors to evaluate blockchain platforms, asset custody, taxation, and cybersecurity when adopting tokenization. These trends signal a dynamic evolution in real estate, urging investors to adapt to new strategies and technologies.
“Companies that embrace these changes and innovate will likely be well-positioned to thrive in the coming decade,” said Jim Eckenrode, executive director of the Deloitte Center for Financial Services.