One Real Estate Universe
Welcome to the INREV/ EPRA series of joint papers examining the characteristics and evolution of the real estate market from both listed and non-listed perspectives. By bringing together insights from these complementary segments, we offer a comprehensive view of market dynamics and trends across the real estate investment landscape. This includes the One Real Estate Universe and the Real Estate in the Real Economy papers.
One Real Estate Universe: Measurement, Performance and Portfolio Construction
This joint paper from EPRA and INREV builds on the foundations of the first report, examining how listed and non-listed real estate can be assessed on a common basis, compares their performance and risk characteristics across major and alternative asset classes, and explores their role within multi-asset portfolios.
Its central finding is that listed and non-listed real estate are complementary instruments tuned to the same market. Across optimisation methods, the data support a material allocation to real estate held through both routes.
Key highlights:
- The two routes move through the same property cycle, with listed prices leading non-listed valuations by about two quarters. The volatility gap between the two routes narrows to around 1.8 once the non-listed series are desmoothed.
- A risk-based portfolio construction supports a total real estate allocation of 19.5%, well above the average current institutional target of 12.5% reported in the ANREV/INREV/PREA Investment Intentions Survey.
- Non-listed real estate’s distinctive contribution is a low, stable correlation with other asset classes that lowers the total risk of a multi-asset portfolio. In fact, it has the lowest average cross-asset correlation of any asset class over the recent decade.
- Listed real estate is a liquid, tactical instrument, a strategic long-horizon holding and a source of diversification within the real estate allocation.