Real Estate or Equities? - Research into the fundamentals of Listed Real Estate

Abstract

What is the main influence on the price and direction of an investment exposure to listed real estate? This is a long-contested question which goes to the heart of any decision on property investment. The critical factor that distinguishes listed real estate from any other investment sector is the fundamental tangible nature of the investment – bricks and mortar. The asset class draws a regular, attractive income, underlying direct property performance over the medium to long term, and possesses the additional benefit of liquidity - unlike direct property investment. This report goes a some way laying to rest a long-term debate concerning the performance of listed real estate – is it equities or is it real estate? The result is clear – listed real estate performance is significantly influenced by the direct real estate market over the medium to long-term. This conclusion suggests that an investment in listed property delivers the accepted security, appreciation and inflation hedge characteristics of bricks and mortar. However, as investors look to diversify risk in their multi-asset portfolio, allocations to listed real estate allow a balance of property exposure across country, sector and markets in an efficient and cost-effect way. The liquid nature of listed real estate also enables the investor to spread risk across property management teams, tenant profile and industry. Representing European listed real estate, EPRA commissioned this study to determine the relationship between these pressures.