Publications

FEBRUARY 12, 2020

To read this full article you need to be subscribed to Newsline.

Sign in Sign up for a FREE subscription

Measuring risk in a real estate portfolio

by Steve Bergsman

Is there an effective way to measure risk in a real estate portfolio? The traditional methodology for assessing risk across all financial portfolios is a measure of volatility or standard deviation, which is also how to measure risk in real estate as well. The difference is real estate is not frequently traded on an exchange like a stock, explains Ben Maslan, managing director with RCLCO Real Estate Advisors. “You don’t have daily pricing. What you have instead is annual appraisals with quarterly marks. Less frequent pricing in part leads to lower volatility. Real estate tends to have lower standard deviation than global equities.”

That being said, there are no fully effective instruments to hedge real estate portfolio risk, although studious types have tried. Over time, various people have attempted to create an investable index in real estate that benchmarks off an index such as the NCREIF Property Index.

“I have seen that attempted several times without any

Forgot your username or password?

We use cookies and other tracking technologies to personalize your user experience on our site and perform site analytics. By clicking on “I accept”, you consent to our Privacy Policy.