– The purpose of this paper is to explore how tenant end demand dependence and investment market segmentation, as estimated through sector type, impacts real estate portfolio strategy in the context of the multi-asset portfolio.
– The analysis is performed for six investor domeciles, for domestic and international investments over several cycles. The analysis is performed in a mean variance framework.
– The findings are consistent with the hypothesis that an investor benefits from investing in real estate assets where end demand is dependent on local factors rather than global factors.
– The efficiency of the overall multi-asset portfolio benefits from a deeper understanding of how the real estate portfolio is constructed. Locally dependent real estate, i.e. real estate that is dependent on local economic factors, tends to better support the overall portfolio than do real estate that is dependent upon global factors.
– The paper contributes to the broader knowledge through extending earlier studies using similar methodology by extending the data series to cover the impact of the latest global financial crises, as well through extending the knowledge how the real estate portfolio should be constructed to better support the overall objectives of the multi-asset portfolio.
