Why commercial real estate belongs in client portfolios
October 28, 2019 | InvestmentNews.com
At a time when many investors and investment professionals struggle to find attractive returns in a world of tissue-thin and even negative interest rates — and while wondering about the continuation of the record-long bull market in equities — an asset class long-favored by institutional investors stands out: commercial real estate. Typically underrepresented in portfolios of individual investors, commercial real estate can offer a mix of stability, income, and capital appreciation that many investors and their advisors are seeking. For a better understanding of commercial real estate and its role in portfolios, InvestmentNews Content Strategy Studio recently spoke with financial services veteran Mark M. Goldberg, Chief Executive Officer of Griffin Capital Securities.
InvestmentNews Content Strategy Studio (INCSS): Let’s start with a core question that advisors and their clients might ask: Why should commercial real estate be part of an investor’s portfolio?
MARK GOLDBERG: Consider the composition of the capital markets. At present, there is approximately $43 trillion in the bond market, $26 trillion invested in publicly traded equities and $17 trillion in U.S. commercial real estate (Source: World Bank, SIFMA, NAREIT, December 31, 2018). Leaving aside cash, commercial real estate accounts for almost 20% of total market assets. Most individual investors are woefully under-allocated in this asset class and represent only a fraction of the reported market capitalization (home values shouldn’t be considered real estate investment). From the point of view of client portfolio construction, you should consider an allocation to commercial real estate as you would any other major asset class.
