For decades, institutional investors, hedge funds and family offices have diversified their portfolios with commercial real estate (CRE).
Commercial real estate as an asset class has historically outperformed most other asset classes. Over the past 20 years CRE returns have outperformed both the S&P 500 Index and corporate bonds.
Commercial real estate has historically delivered higher income returns than other major asset classes. Historically, over 70% of the total returns from commercial real estate have come in the form of income rather than capital appreciation.
According to Modern Portfolio Theory (MPT) suggests the most efficient way to invest while still maximizing returns is to add uncorrelated assets. Commercial real estate has exhibited historically low negative correlation to equities and bonds.
Whether equities are in a bull or bear market there is confidence in owning tangible hard assets and real property or as the term goes “bricks & mortar.”
While there are multiple tail wins in commercial real estate sector the main driver is U.S. population growth which is growing on average approximately 1.1% per year. By 2034 there could be 40 million more people in the U.S. 40 million more people is approximately 2 additional states the size of New York.