A risk worth taking: Adoption of a stronger approach to risk management will improve the performance of real estate
The global financial crisis had profound implications for real estate, with trillions of dollars being wiped off the asset class and serious questions being raised as to the credibility of real estate as a significant element of institutional portfolios. Since that time, most real estate markets have experienced a recovery and, unlike other crises such as the early 1990s or the 1970s, investors have continued to demand exposure to the asset class.
Despite this recovery, it is clear that one of the most significant long-term implications of the crisis is for stronger risk management of the real estate investment process. Investors have sought to gain greater control and transparency over their real estate exposure, and regulators — whether through Basel III, Solvency II, Dodd-Frank or AIFMD — are increasing their oversight of the real estate industry. The combination of these factors is leading to stronger risk management, and this article focuses on the practi