Nuveen has released research examining the potential benefits and challenges of geographic diversification in institutional real estate portfolios. The firm argues domestic-only strategies carry concentration risk because the global investable real estate market is dominated by a relatively small number of countries. Diversification benefits within an individual country tend to plateau, while investing across regions can continue to reduce portfolio volatility because property markets in the United States, Europe and Asia Pacific have relatively low correlations. International allocations also may improve risk-adjusted returns even when overseas markets modestly underperform domestic investments on a stand-alone basis.
The global investable real estate market is valued at approximately $12.5 trillion, with the Americas accounting for more than 40 percent; Europe, the Middle East and Africa representing approximately 30 percent; and Asia Pacific comprising more than one-quarte
