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Want to build a portfolio that actually stays stable when markets go crazy?
Every smart investor wants to rank for the highest returns and most reliable income streams. After all, quality investments lead to:
- Better portfolio performance
- More consistent returns
Here’s the problem:
Building a stable portfolio is hard work. To rank well for competitive returns and highly profitable investments you need to be investing in commercial real estate.
Without real estate, your portfolio just won’t be stable.
Want to know the best part? Commercial real estate investing generated $757 billion in transactions during 2024 alone — a massive 13% increase from the previous year.
Let’s jump in!
What you’ll discover:
- Why Commercial Real Estate Stabilizes Your Portfolio
- The Numbers Behind Real Estate’s Performance
- Real Estate Performance Strategies
- How to Balance Risk and Reward
Why Commercial Real Estate Stabilizes Your Portfolio
Commercial real estate provides a ton of benefits for your portfolio. If you haven’t already started building real estate exposure, here are three reasons you should.
Reduce Portfolio Volatility
Real estate is one of the best ways to reduce your portfolio’s volatility.
Why? Because real estate assets are one of the most important stability factors for investment portfolios. When you build more high-quality real estate exposure from assets that markets already trust — your stability increases.
And as you know…
Higher stability = More consistent returns.
High-authority real estate assets added each quarter to portfolios show markets the portfolio is trustworthy. As more real estate gets added, two things happen:
- Markets start viewing the portfolio as more stable and reliable.
- Portfolio volatility naturally decreases.
It makes sense, right?
Build Wealth & Income
Think of real estate like endorsements from other successful investments.
When investors need to diversify beyond traditional assets, many turn to trusted sources like a Rocky Mountain cash home buyer to explore real estate opportunities that can provide the stability their portfolios desperately need.
Increase Portfolio Performance
One of the most underrated benefits of commercial real estate is performance enhancement. Real estate increases performance in two ways.
Firstly your stability increases, which means you get more consistency during market volatility. You get a big boost to your performance because you are diversified across the right asset classes.
And because people are more likely to trust investment portfolios they find performing “consistently” during market stress, it leads to more:
- Investor confidence
- Long-term wealth building
That’s a win-win-win.
The Numbers Behind Real Estate’s Performance
Real estate performance is different. Indeed, real estate assets need exposure pointing to every different section of the market.
That includes:
- Residential properties
- Commercial buildings
- Industrial assets
- Mixed-use developments
Performance building is hard work on its own… But it goes up a notch when you have to build exposure to very specific asset types like industrial and commercial properties.
Real Estate Performance Strategies
Now to the commercial real estate performance strategies. Investment teams use these exact strategies to generate results like this:
Property values are holding strong. Commercial property values are up 4% in the past 12 months despite all the economic uncertainty floating around.
The industrial sector continues to dominate with vacancy rates steady at 6.8% in Q3 2024.
But here’s something most people don’t realize…
Private debt funds in real estate delivered a 9.2% internal rate of return between 1996-2020. They consistently beat public investment-grade and high-yield bond benchmarks by significant margins.
If they can do it… You can too. Commercial real estate success is as simple as that!
Real Estate Investment Trusts (REITs)
When it comes to commercial real estate building… Diversification is still king.
Here’s why: The best way to get more exposure to commercial real estate is to build it naturally. Adding REIT exposure means you essentially pick up high-quality diversification at no extra cost or effort.
REITs work like mutual funds for real estate. You buy shares that represent ownership in a portfolio of commercial properties.
Start by investing regularly in REITs that your market will love. You should choose valuable long-term assets that:
- Provide tons of diversification
- Are relevant to your goals
- Include multiple property types
Real Estate Crowdfunding Platforms
This is the favorite commercial real estate strategy…
Here’s how it works: Start by finding the top crowdfunding platforms for your target investment goals.
You want to replicate the real estate exposure pointing at these top performing platforms.
Direct Property Investment
Want an easier way to build real estate exposure? Direct property investment might be your ideal commercial real estate strategy.
Most exposure is built through indirect methods. Direct property investment is different because you are buying the actual real estate without going through intermediaries.
For investors with more capital, buying commercial properties directly offers maximum control. You handle tenant relationships, property management, and all the decisions that affect your returns.
How to Balance Risk and Reward
Commercial real estate isn’t some magic solution — it comes with its own set of challenges.
Interest rate sensitivity affects property values and financing costs. When rates rise, property values can decline and borrowing becomes more expensive.
Market cycles impact different property types differently. Office buildings face challenges from remote work trends, while industrial properties benefit from e-commerce growth.
Liquidity considerations matter too. Unlike stocks you can sell in seconds, real estate transactions take time and involve significant costs.
The key is balancing these risks with the stability benefits. Most investment advisors suggest keeping real estate exposure to 15% or less of your total portfolio for individual investors.
Market Outlook and Opportunities
Recovery signals are appearing everywhere. Despite recent challenges, 68% of market participants indicated they’re likely to increase their activity in the next 12-18 months.
Multifamily properties continue showing strength as housing affordability issues drive rental demand. Industrial properties benefit from continued e-commerce growth and supply chain reshoring.
Technology is creating new opportunities. Data centers, cell towers, and digital infrastructure represent growing segments within commercial real estate.
Portfolio Integration Strategies
Adding commercial real estate to your portfolio requires careful planning.
Start small and diversify. Begin with REITs or real estate funds to understand how real estate performs in your overall portfolio mix.
Consider your timeline. Real estate works best as a long-term holding. Short-term volatility can impact values, but the income and appreciation potential typically reward patient investors.
Rebalance regularly. Like any asset class, real estate allocations can drift over time. Regular rebalancing ensures you maintain your target exposure levels.
Wrapping It Up
Building commercial real estate exposure is one of the most effective ways to boost portfolio stability and increase your consistent returns — including income generation & capital appreciation. It can save you:
- Volatility — so you can focus on other aspects of your investment strategy such as growth investing and income generation.
- Risk — you’ll reduce concentration in traditional assets.
- Stress — you’ll get a bunch of diversification benefits in just a few additions.
By giving you an easy-to-follow blueprint that is proven to stabilize portfolios. To quickly recap:
- Find the best performing real estate asset classes
- Add them through your powerful new real estate exposure methods
- Build that stability
- Watch how markets react
- Rinse and repeat
This is the only portfolio stability strategy that has stood the test of time and it’s applied on all successful portfolios by investment professionals.
Pretty cool, right?