Commercial Real Estate

A Substantial Asset Class

Commercial real estate continues to gain favor as a compelling asset class for portfolio diversification. A "real asset" with low correlations to equities and fixed income investments, direct commercial real estate investment vehicles, like NAV REITs, are becoming a cornerstone option for the alternatives allocation of investment portfolios. 

Figure A - U.S. Investment Universe Market Size
Figure A.
Sources: Federal Reserve, Bureau of Economic Analysis, NAREIT, SIFMA, and LaSalle Investment Management. Data and estimates as of December 31, 2014.

In addition to its lower correlation to equities and fixed income investments, commercial real estate can offer investors an alternative source of income and also act as a hedge against inflation.

Institutional investors have long been aware of the attractive features of commercial real estate investing. A recent survey indicated that pension funds on average currently target their real estate allocation at 9.5% of total AUM*, a figure that has been stable over the last several years.

*From Kingsley/IREI Survey (2012).