What are the risk and return expectations of pension funds investing directly in equity real estate?
Most investors in “core” properties (i.e., high-quality, stable, income-producing office, industrial, multifamily and retail properties) expect to receive around 8 percent to 9 percent on their unleveraged real estate investments. If they leverage, they tend to leverage assets between 5 percent and 60 percent, with average portfolio leverage ranging between 20 percent and 40 percent. Leveraged return expectations for core real estate investments, therefore, range between 10 percent and 15 percent. Some investors are beginning to look at the private markets as a high-yield investment alternative and, therefore, they demand and expect higher returns from their real estate investment portfolios. Investors expect value-added investment returns of between 12 percent and 15 percent and opportunistic returns in excess of 18 percent to 20 percent. Most of these investors expect their portfolios to be highly leveraged. Many of the larger investors have both core and high-yield investment compon
Most investors in “core” properties (i.e., high-quality, stable, income-producing office, industrial, multifamily and retail properties) expect to receive around 8 percent to 9 percent on their unleveraged real estate investments. If they leverage, they tend to leverage assets between 5 percent and 60 percent, with average portfolio leverage ranging between 20 percent and 40 percent. Leveraged return expectations for core real estate investments, therefore, range between 10 percent and 15 percent. Some investors are beginning to look at the private markets as a high-yield investment alternative and, therefore, they demand and expect higher returns from their real estate investment portfolios. Investors expect value-added investment returns of between 12 percent and 15 percent and opportunistic returns in excess of 18 percent to 20 percent. Most of these investors expect their portfolios to be highly leveraged. Many of the larger investors have both core and high-yield investment compon
