Why invest in real estate?

The arguments for investing in real estate are compelling. The long-term sustainability of returns and coping with more volatile financial markets have become increasingly important. As a result, there’s a widespread acceptance that investors – both institutional and retail – should embrace a more diversified approach to their investments, which includes commercial real estate.

Diversification

Investing in real estate allows you to spread some of the risk in a balanced portfolio over the long term. That's because the returns from real estate have a low correlation with equities and bonds over long periods. Also, investing across a variety of international real estate markets provides additional diversification opportunities and can further reduce risk as well as provide a more balanced, income-generating portfolio.

Stability of income

One of the advantages of real estate investment is the stability of income that rental payments by tenants provides. Most commercial real estate contracts have relatively long lease lengths, therefore offering a long-term and secure income stream.

Inflation hedging

As a real asset, real estate has typically provided long-term returns over above that of the rate of inflation. This is important, as it can protect capital from the erosive effects of rising prices.

Low volatility

Commercial real estate is typically a less volatile investment than other assets that aim to provide inflation-beating returns. While there may be periods of short-term volatility, over the long term, returns from commercial property tend to be more stable. This is partly because the market is less liquid than other markets, such as equities and bonds, and investors also tend to hold on to their assets for longer.