Investing in Real Estate: An asset class worth considering


You are likely familiar with the potential benefits and risks of investing in stocks and bonds, but are you aware of real estate as an asset class? Today, many investors look to real estate products that invest in the domestic and/or international real estate market (e.g., office, retail, industrial, multifamily properties). Typically, they select investment products that either own real estate directly or invest in real estate investment trusts (REITs).1

Three leading reasons why you should consider adding real estate to your portfolio:

  1. Diversification. Historically, prices for direct investments in real estate have not moved in tandem with stock and bond markets. As a result, including this asset class in a portfolio of stocks and bonds can enhance diversification — thus helping to strengthen the stability of the portfolio. REITs tend to follow — or correlate — more closely with stock and bond markets and, as result, provide fewer diversification benefits. However, REITs — the more volatile option — have historically outperformed direct real estate investments: posting since 1995, an annual return of 10.7% shown in the National Association of Real Estate Investment Trusts (NAREIT) index, compared to direct real estate’s 9.4% as shown in the National Council for Real Estate Investment Fiduciaries (NCREIF) index.2 Direct real estate and REITs can also be combined in a portfolio and diversify each other.
  2. Inflation protection. According to Martha S. Peyton, TIAA-CREF’s Head of Global Real Estate Strategy & Research, “Over five-year holding periods historically, commercial real estate returns have outpaced inflation. Over short-term periods, commercial real estate returns have been modestly correlated with inflation, demonstrating their “inflation hedging” capacity”. REITs also generally outpace inflation due to income from underlying products and their dividend-yielding structure.
  3. Income potential. Historically, real estate investments have been reliable generators of income. They typically yield returns derived from a variety of stable income streams, such as rent, property appreciation, loan payments, and inflation. In fact, since 1995, REITs have posted an annual total return of 10.7%, as shown in the NAREIT index compared with 9.4% for direct real estate shown in the NCREIF index.3 Please note that REITs — as part of their structure — are required to pay at least 90% of their taxable income in dividends, which tends to generate a stable and consistent income stream for investors.

Why choose TIAA-CREF for your real estate investments.

A leader in the real estate investment market for more than 60 years, TIAA-CREF is currently the largest real estate manager of U.S. tax-exempt assets in the world4 — with more than $22 billion in real estate equity investments across the United States and Europe.5 Our seasoned portfolio management teams supervise direct investments in real estate and investments in real estate trusts.

Before you invest — contact your TIAA-CREF Financial Consultant

Remember to seek the advice of an experienced financial consultant before making significant changes to your investment portfolio. Your TIAA-CREF Financial Consultant can help you decide if this asset class is appropriate, based on your objectives and temperament, and, if so, which products make the most sense. Real estate investments, like other asset classes, come with certain risks. Real estate markets can be volatile depending upon economic conditions and construction cycles. If you have an assigned Wealth Management Advisor, call your advisor team directly.

Diversification is a technique to help reduce risk. There is no absolute guarantee that diversification will protect against a loss of income.

Wealth Management Group services are provided through Advice and Planning Services, a division of TIAA-CREF Individual & Institutional Services®, LLC, a Registered Investment Adviser.

You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877 518-9161, or go to for a current prospectus that contains this and other information. Please read the prospectus carefully before investing.

Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.

This material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.

TIAA-CREF Global Real Estate personnel provide investment advice and portfolio management services through the following entities: Teachers Advisors, Inc., TIAA-CREF Investment Management, LLC, and Teachers Insurance and Annuity Association. Teachers Advisors, Inc. is a registered investment adviser and wholly owned subsidiary of Teachers Insurance and Annuity Association.

1 REITs: Similar to a closed-end investment company, but organized to manage a portfolio of real estate investments and distributes to its shareholders at least 95% of its net earnings annually. Usually traded publicly, REITs often specialize in office buildings, shopping centers, or hotels

2 TIAA-CREF, “REITs and Real Estate: Complementary Through the Cycle” By Martha Peyton, Thomas Park and Fabiana Lotito, 2012. Please note that it is not possible to invest in an index. Performance for indexes does not reflect investment fees or transaction costs.

3 TIAA-CREF, “REITs and Real Estate: Complementary Through the Cycle” by Martha Peyton, Thomas Park and Fabiana Lotito, 2012.

4 Source: Pensions & Investments, October 3, 2011. Rankings based on institutional tax-exempt assets under management as reported by each responding asset manager.

5 As of March 31, 2012.

Your real estate investing questions: answered.

For rich perspectives on this asset class and why it might suit your investment objectives, we offer Key Drivers of Commercial Real Estate, by Margaret Brandwein, Managing Director and head of the TIAA Real Estate Account, and Thomas Park, Senior Director of Global Real Estate, Strategy and Research.

© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017