Commercial Real Estate as an Asset Class

Abstract

We survey the properties of commercial real estate (CRE) as an asset class. We first illustrate its importance relative to the US economy and to other asset classes. We then discuss CRE ownership patterns over time. While the academic literature has emphasized Real Estate Investment Trusts (REITs), about two thirds of CRE is owner-occupied. We next study the return properties of CRE indices, indices on particular property types, and discuss what is known about the returns to individual properties. We briefly discuss CRE debt before turning to property derivatives. Finally, we consider how including CRE in a portfolio affects the portfolio's performance.

Keywords: Commercial Real Estate, Corporate Real Estate, Property Returns, REITs, Portfolio Diversification

JEL Classification: G11, G12, R33