Allocating to Commercial Real Estate

Most investors believe in the value of diversification. Among the major asset classes, for example, it’s often the case that stocks, bonds, and property values do not always move in tandem. During the dotcom bubble in stocks, for example, both housing and bonds looked relatively cheap.

The stock market’s wild gyrations in August were enough to put knots in the stomachs of many investors. For those who believe that equities are getting frothy, there certainly is some supporting evidence available. A Yale survey, for example, shows that “valuation confidence” is at historical low levels. Robert Shiller has pointed out that a Cyclically Adjusted Price Earnings ratio (CAPE) is still well above the historical average. 

At such times, investors might well want to look again at whether their portfolio’s asset allocation is appropriate. Commercial real estate (CRE) has always been a key asset class for most larger portfolios, and crowdfunding sites have now made CRE available to accredited investors generally.  Commercial real estate is a unique asset class that acts and behaves differently from many other investment classes like stocks or bonds – and real property valuations are thought to be only at average levels.

Read Full Story: Allocating to Commercial Real Estate