Why Diversify Globally

Only 30% of the world’s investable real estate is in the United States. The remaining 70% is international1

Times have changed. Investing in real estate in other parts of the world was once thought of as “risky.” But today, it may be even more risky to invest only in the United States or in just one type of property. Investing in a global portfolio that includes more than one real estate market or a mix of property types may help provide diversification.2

 

The world’s investable real estate

 

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Real estate markets around the world don’t necessarily correlate to each other

Remember, the lower the correlation number between two investments, the less likely they will move in tandem with each other. While the markets in U.S. cities tend to correlate closely to each other, note how much less of a correlation there is between U.S. cities and other markets around the world. These differences in correlation show why investing in a global portfolio that includes more than one real estate market may help provide diversification.2

 

Correlations between the returns of various office markets around the world3

Correlations Cities

Growing middle-class fuels emerging-market need for commercial real estate

By 2050, 19 of the 30 largest economies will be from today’s developing countries.4 An improved business climate, coupled with the large working-age populations in many of these nations, has created a growing middle-class consumer market. These emerging consumers need places to work and shop, and businesses need distribution hubs to supply the goods they demand. Commercial real estate meets those needs—and may provide a way to gain exposure to growing local economies.

 

Emerging market income growth to surpass that of the United States

Average Annual Per Capita Income Growth

International real estate investing risks include: the burden of complying with a wide variety of foreign laws and the uncertainty of such laws; the tax treatment of transaction structures; political and economic instability; foreign currency fluctuations; and inflation and governmental measures to curb inflation may adversely affect our operations and our ability to make distributions.

1
Sources: “A Bird’s Eye View of Global Real Estate Markets: 2012 Update,” Prudential Real Estate Investors Research. Updated by Hines Research in 2016. Used with permission. NCREIF Property Index for U.S. market sector percentages as of 6/30/16.

2Asset allocation/diversification does not guarantee a profit or protect against a loss.

3Sources: NCREIF, Property Market Analysis and  Hines Research. Data as of 3/31/16. Past performance cannot guarantee comparable future results.

4Source: The World in 2050: From the Top 30 to the Top 100, HSBC Global Research, January 2012.

5Percentages are calculated in constant year 2000 U.S. Dollars. There is no guarantee that gross domestic product (GDP) or income will grow as anticipated. The projected income growth shown in this chart is not reflective of Hines Global REIT II’s actual or anticipated economic performance.