Growth of Private Real Estate
Last updated
Last updated
Source:
As of December 31, 2021, equities (stocks) make up the largest portion of the GMP, valued at $77.8 trillion or 43% of the total. Government bonds are the second largest, worth $43 trillion or 24%. Investment-grade (IG) credit is third, totaling $26.7 trillion or 15%.
The graph illustrates the performance of various asset classes, including Private Equity, Natural Resources, Real Estate, Private Debt, and Infrastructure, from 2000 to 2020. Real estate, shown by the blue line, experienced steady performance with less volatility compared to other asset classes. While it faced a notable dip during the 2008 financial crisis, like other assets, it recovered gradually and maintained consistent returns without dramatic swings.
The chart displays the performance of public REITs by market capitalization for the first half of 2023. It shows that Small Cap REITs led with the highest average return of 8.59%, followed by Mid Cap REITs with 7.60%. Large Cap REITs also performed well, delivering a return of 7.41%, while Micro Cap REITs posted a return of 7.00%.
As of December 2023, there are 940 listed REITs worldwide, with a total market value of about $2.0 trillion. This marks a huge increase from 30 years ago when there were only 120 REITs in just two countries. Europe and the Pacific regions have experienced the most growth since 2020, with Europe adding 62 new REITs (a 31% increase) and the Pacific adding 13 new REITs (a 25% increase). Asia has also grown, with a 22% increase since 2020.
The pie chart above shows that over the past decade, the REIT sectors have evolved significantly. In 2010, the largest sectors were traditional property types, including retail centers, residential buildings, healthcare facilities, and offices.
Since then, the number of U.S. REIT sectors has expanded from nine to twelve, and could be as high as seventeen when considering subcategories within retail and residential properties. Newer or expanded sectors such as data centers, infrastructure (including wireless towers), industrial (including logistics), and single-family home rentals have contributed to increased investment opportunities and growth in the listed real estate market.
The graph compares US private real estate net operating income (in green) to the US Consumer Price Index (CPI) (in gray), both indexed to 100 starting from 1996. The purpose of this comparison is to show how private real estate income has generally grown faster than inflation over time.
The green line, representing real estate income, consistently rises above the gray line, which tracks inflation. This suggests that investing in US private real estate has provided better income growth compared to the general rise in prices (inflation) in the economy, offering investors a hedge against inflation.
Source:
Source:
Source:
Source:
Source:
