The market volatility experienced during the COVID-19 era has caused many individuals to alter their investment strategies in an attempt to generate consistent income and better diversify their portfolios. The pandemic triggered market volatility after an 11-year bull-market, leaving many investors searching for balanced investments. As a result, investors are increasingly turning to real estate as a potential way to find balanced investments and mitigate risk.
In the U.S., investors have historically been – and continue to be – under-allocated to real estate. According to the Hodes Weill & Associates 2020 Institutional Real Estate Allocations Monitor, institutions, such as pensions, insurance companies and universities, allocate on average 10.6% of their portfolios to commercial real estate, which has continued to rise year-over-year as investor sentiment around the asset class remains solid. Meanwhile, other investors typically hold less than 1%, according to the 2018 Institutional Real Estate Allocations Monitor.
Real estate may provide income and portfolio diversification for five key reasons.