The past few decades have seen commercial real estate become the fourth asset class, joining stocks, bonds, and cash on the radar of institutional investors. A 2015 NAIOP analysis set out to backtrack the path of CRE from alternative investment status to trustworthy portfolio asset, while providing insight on what drove this process, as well as looking into future possibilities and implications for this new asset class.

According to NAIOP, institutional investment portfolios did not include commercial real estate before 1980. With the National Council of Real Estate Investment Fiduciaries (NCREIF) launching its index of institutional real estate returns in 1982, a pivotal benchmark was established, and the investment floodgates opened. By the early 1990s, the equity REIT market had grown rapidly.

In a fortuitous twist, the global financial crisis of the late 2000s brought about a pricing correction, which lowered the barriers to entry into high-profile CRE markets such as NYC, Chicago, Los Angeles, and the like. Nowadays, multi-billion, cross-market portfolio sales are the norm—take the largest office deal of 2017, in which Duke Realty sold 72 medical office properties to the Healthcare Trust of America, for a modest $2.3 billion. Why modest? Because we looked at U.S. multifamily and office property sales going back to 1995 and found that a $2 billion property price tag no longer stands out the way it used to.

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