The preeminence of office and retail properties can probably be attributed to established markets, more transparent operating models and their proven track records. But, over time, their dominance has waned, as investors have increasingly shifted their portfolio allocations to other property sectors. In 2001, office assets accounted for 46% of the capital value in the MSCI Global Annual Property Index, and retail assets accounted for 31%. Together, these two sectors made up more than three-quarters of the total index. As at end-2018, however, they accounted for less than two-thirds of the index, with office falling below 40% and retail’s weight down to 24%. They are still the two largest sectors in the index, but their share of the average portfolio has diminished.
(Sept 9): Anyone who has played the computer game SimCity will be familiar with the challenge of having to find the right balance of residential, commercial and industrial zones to develop their virtual city. In the real world, investors in commercial real estate face a similar dilemma when deciding the appropriate mix of property types for their portfolios. Office and retail assets have traditionally made up the bulk of portfolios. While they still do, their dominance has diminished over recent decades, as allocations to other real estate sectors have increased. The shift in the composition represents an evolution of the asset class and highlights how technology and the search for yield have led investors to diversify and seek exposure to other property types.
Established markets previously set the tone
