PREA: the real estate investment universe in 2021

Real estate is simultaneously local, national and global.

It is subject to nearby competition at a specific address, affected by national economic dynamics such as monetary and fiscal policy, influenced by cross-border real estate capital flows, and shaped by global trends in climate change, taxation, technology, tourism, trade, and (as we all now know) pandemics.

The nonstop interaction between local, national, and global forces is, to a large degree, unique to real estate among asset classes. Analyzing the size and distribution of the real estate investment universe provides important strategic perspectives for all three views of real estate. Like insights that come from zooming in and out of a digital map, these estimates help investors put individual deals in a wider context.

At each scale, real estate investors look for different reference points to gain context to market size and opportunity. A continental or regional map orients investors quite differently from a street map showing microfeatures such as local landmarks or an asset’s closest competitors. At the global level, real estate’s size as an asset class is a key consideration for assessing the depth of the investment opportunity in multi–asset class portfolios. At the national level, relative country allocations are a major strategic consideration for cross-border investors and one that market size estimates help investors better evaluate. At the local or metropolitan level, market size informs portfolio construction approaches and concentration risk in a given city. The insights that come from sizing up real estate at each scale give investors a frame of reference for real estate allocations and strategy.