According to an analysis of real estate allocations from 1990 – 2005 conducted by Ibbotson Associates, adding global real estate allocations heightened the returns of global portfolios, with nearly all of that increase coming from U.S. real estate investments.
A press release about the Ibbotson study suggests that investors should continue funneling their assets to the North American real estate market. Thomas Idzorek, one of the co-authors of the study, said, in the press release, that about half of total real estate allocations should be in that region. He predicted allocations to European and Asian real estate markets will also increase in the future.
The study forecasts a change in future performance of global real estate. For instance, Ibbotson expects allocations to global real estate to range from 15% to 24% at the moderate-risk level (10% volatility). Those allocations were diversified among global real estate markets.
“Approximately half of the real estate allocation – 12.1% of the total portfolio – still went to North America,” said NAREIT Executive Vice President of Research and Investor Outreach Michael Grupe, in the news release. “However, one-third of the forward-looking real estate allocation – 7.8% of the total portfolio – went to Europe, and 3.4% of the total portfolio went to Asian real estate.”