LaSalle Study Examines Advantages of Combining Public and Private Real Estate Investments
A recent study conducted by LaSalle Investment Management reinforces the important complementary relationship between publicly-traded global real estate securities (“GRES”) and global private real estate. The analysis, published in a recent whitepaper, highlights the benefits of GRES and global private real estate as well as the additional advantages investors can gain by combining the two strategies.
Globally, real estate is one of the largest asset classes available to investors, with LaSalle estimating that global institutional real estate investments totalled $9.6 trillion as of 2016. LaSalle also cites publicly-traded GRES and global private real estate as large wealth sectors, with estimated institutional market sizes of $4.5 trillion and $5.1 trillion, respectively. Each sector offers a large universe of potential investments, strong historical and potential future performance, diversification benefits relative to equities and fixed income, and a range of risk/return strategies.
Key findings from LaSalle’s report list advantages of combining GRES with private real estate, which include:
Publicly traded GRES are generally similar to private real estate: GRES are primarily a core strategy, with long-term return expectations similar to private core real estate with low/ moderate leverage. Although some companies engage in development and riskier property types, the vast majority of the sector is comprised of existing stabilized properties. In addition, investment strategies are available to invest exclusively in lower risk companies/approaches.
Combining GRES and private real estate strategies is likely to generate better risk-adjusted returns than either one alone: The advantages of GRES present a strong case for investing in both publicly traded GRES and private real estate and for a larger allocation to publicly traded GRES in a real estate portfolio seeking to optimize investment performance.
Steve Ralff, Managing Director of LaSalle Investment Management Securities, said: “There are numerous ways for institutional investors to take advantage of the complementary relationship between public and private real estate. GRES can account for a meaningful portion of a core real estate allocation - both domestic and non-domestic – particularly for small and medium size institutions. GRES provides an efficient way to access non-domestic real estate as well as flexibility in managing exposure and risk across cycles.”
To read more, view the full report HERE.