This article was originally published in January 2021.
Traditionally, real estate was often viewed as little more than a downside hedge for a diversified portfolio. This reflects its low correlation with equities and bonds and its perceived inflation-linked income profile. It was frequently viewed as a relatively stable, reliable but unexciting investment option.
While this perspective has been outdated for some time, rapid evolution in the sector over the last decade has rendered it obsolete. Real estate today is a truly global institutional market with much improved transparency and offering a holistic set of products to suit every investor’s risk/return appetite. Options range from low-risk, lower-return core investments through core-plus, value-add to opportunistic at the top of the risk spectrum.
Real estate investments are more liquid than ever before, with active cross-border capital flows supporting a deep and sophisticated market. Rather than just being an add-on for multi-asset portfolios, it offers attractive opportunities and risk diversification in its own right.
Several characteristics make this possible: the unique attributes of every single asset; changing occupational preferences; the integration of technology; and a shift from real estate as a static investment class towards an operational model focused on delivering a full service to the occupier.