Operational real estate (OPRE) is reshaping the property investment landscape. Across sectors such as hospitality, healthcare, student accommodation, build-to-rent and data centres, asset value is increasingly determined not only by the quality of the real estate itself, but by the performance of the business operating within it. For investors, operators and lenders, understanding operational performance, sector-specific risks and long-term value drivers is becoming critical to making informed strategic decisions and navigating an increasingly complex market. In this article, Shaun Skidmore explores the rise of operational real estate and the factors driving its continued growth.
What is Operational real estate?
Operational real estate has become one of the most significant themes shaping property investment and development today. Whilst real estate has traditionally been assessed through the quality of the asset, its location and the security of its income, investors are increasingly looking beyond the physical building and focusing on the performance of the business operating within it.
The Investment Property Forum (IPF) defined operational real estate as:
“Returns which are directly and deliberately linked to the revenues and profits of the business conducted on or from the premises.”
At its simplest, OPRE refers to assets where value and income are closely linked to the success of the operator and the services delivered within the property. Assets may be held under traditional lease arrangements or operated through management contracts, franchise agreements, hybrid lease structures or owner-operated models. In each case, investment performance depends not only on the underlying real estate but also on operational execution.
Why operational real estate is growing
The concept itself is not new, hotels have long been analysed and valued on their ability to generate trading income. However, the operationalisation of real estate has accelerated significantly in recent years and now extends across a wide range of sectors.
Today, operational real estate includes serviced apartments, co-living developments, leisure destinations, healthcare facilities, senior living schemes, purpose-built student accommodation, self-storage facilities, data centres and build-to-rent housing.
Several long-term structural trends are driving this evolution. Demographic changes are increasing demand for healthcare, senior living and alternative residential products. Digitalisation continues to support investment into data infrastructure and technology-enabled assets. At the same time, changing consumer expectations are influencing how people live, work and spend their leisure time while, investors are placing greater emphasis on income resilience and operational performance rather than relying solely on capital appreciation.
As a result, understanding the business behind the building has become just as important as understanding the building itself.
The intersection of property and business performance
What makes OPRE particularly compelling is that it sits at the intersection of property and business. Understanding the physical asset remains important, but it is no longer sufficient in isolation.
The traditional distinction between landlord and tenant is becoming increasingly blurred as owners and operators work more closely together to create and capture value. A high-quality building alone will not maximise value if the underlying business is underperforming. Equally, a strong operator can enhance value through customer engagement, operational efficiency and effective management.
For stakeholders assessing investment opportunities, refinancing options or strategic alternatives, understanding both real estate and business performance has become essential.
Sector-specific drivers of value
The importance of operational performance varies by sector.
In hospitality, value is influenced not only by the quality of the asset but also by occupancy levels, average room rates, customer experience, staffing efficiency and brand positioning.
Within leisure assets, visitor numbers, dwell time, ancillary spending and operational management can directly influence financial performance and investment returns.
Healthcare assets present their own unique considerations. Investors increasingly recognise that understanding an operator’s business model, regulatory environment, staffing profile and quality of care is essential when assessing both value and risk.
The same is true for operational living sectors such as build-to-rent, co-living, student accommodation and senior housing. The strongest-performing assets are often those that combine robust real estate fundamentals with a clearly defined operational strategy focused on occupancy, customer experience and long-term retention.
Data as a driver of value creation
One of the defining characteristics of operational real estate is the growing importance of data.
Investors increasingly seek transparency around operational performance, customer trends and Key Performance Indicators. Measures such as occupancy, EBITDA, revenue per available room (RevPAR), customer retention and net operating income are now analysed alongside more traditional property metrics.
The ability to collect, interpret and act upon operational data is becoming a significant driver of value creation. For investors and operators alike, access to reliable performance data supports better decision-making, improved operational efficiency and more effective long-term planning.
Understanding risks and challenges
Whilst operational real estate can offer attractive returns and greater alignment between property and business performance, is not without its challenges.
Increased exposure to operational performance inevitably brings greater complexity. Labour shortages, wage inflation, rising energy costs, regulatory changes and evolving consumer expectations can all affect financial performance. In some sectors, these operational factors may have a greater impact on value than movements in the property market itself.
Success therefore requires specialist sector knowledge, experience operators and a clear understanding of the relationships between investors, managers and operating businesses. There is no universal model, and each operational real estate sector has its own opportunities, risks and value drivers.
The operational strength of the operator is as important as the financial strength.
Looking ahead
Operational real estate represents one of the most dynamic areas of the property market. It reflects a broader shift away from viewing property solely as a physical asset and towards recognising the critical role that businesses, customers and wider societal trends play in creating value.
As the sector continues to mature, investors, lenders and operators that successfully integrate operational and real estate expertise will be best positioned to identify opportunities, manage risk and maximise long-term value.
How we can help
Operational real estate requires more than traditional property expertise. Whether you are evaluating investment opportunities, reviewing operational performance, considering strategic options or responding to financial pressures, understanding both the asset and the underlying business is essential.
Our Advisory team works with investors, operators and lenders across a range of operational real estate sectors, providing support with asset and business evaluation, options analysis, operational improvement, turnaround planning, consensual exits and managed disposal processes.
If you would like to discuss the challenges or opportunities facing your operational real estate business, contact our advisory experts.
*Based on themes and findings discussed within Macfarlanes Fully Operational: the future of real assets published November 2024, IPF and EURAZEO Operational Real Estate in Europe Dec 2025.
