Publications

- May 1, 2016: Vol. 8, Number 5

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Adding value: Varied strategies are blurring the lines between the risks commonly associated with noncore investment

by Reg Clodfelter

1 Sometimes it seems, for an institutional investor, adding value to a real estate portfolio is as simple as dropping capital into a noncore bucket. Unfortunately, unlike money, investment strategies cannot always be taken at face value. Investors globally are expecting 65 basis points greater return output from their real estate portfolios in 2016 than they expected in 2015, according to the 2016 Institutional Real Estate Trends survey conducted by Kingsley Associates and Institutional Real Estate, Inc. This boost is expected at a time when the prices of core buildings are at record highs and after returns from the NCREIF Open-end Diversified Core Equity fund index declined in every quarter of 2015. To achieve the returns they are expecting, institutional investors likely will need to take a more active approach to their real estate investments, putting more emphasis on value-add investment strategies. This reality has put many institutional investors in a bind.

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