Continental Factors in International Real Estate Returns

This paper examines the extent to which real estate returns are driven by continental factors. This subject is relevant for determining the country allocation of international real estate portfolios. If returns are driven by a continental factor, investors should look for diversification opportunities outside their own continent. This paper finds strong continental factors in North America and especially in the United States. For the Asia-Pacific region, real estate returns are not driven by a continental factor. The results suggest that, for European, North American and Asia-Pacific real estate portfolio managers, the Asia-Pacific region provides attractive international diversification opportunities.