Dreaded Denominator Effect Further Drains Commercial Real Estate

The Wall Street Journal has a fascinating article today about yet another development that doesn't bode well for the commercial real estate market in New York City: the denominator factor. Be forewarned -- it's rather complicated. But it's worth the effort, we swear.

Essentially, institutional investors like pension funds have guidelines as to what percentage of their overall investment portfolios can be dedicated to real estate investment: "Big pension funds, college endowments and insurance companies typically allocate most of their investment dollars to stocks and bonds and sometimes a smaller amount -- about 6% to 10% for pension funds and as much as 30% for other institutions -- to real estate."  read more »

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