The Benchmark Office Real Estate SCTR℠ Index measures the performance of publicly-traded real estate securities, primarily Real Estate Investment Trusts (REITs), of exchange listed companies in the U.S. that own and manage various forms of office real estate and rent space in those properties to tenants. The office securities include real estate investment trusts that specialize in different properties and markets such as skyscrapers, office parks, government agencies, and central business districts.
Portfolio Application & Uses
Risk Management &
Strategic Real Estate
Office properties have long cycles with cash flows that tend to be stable: Lengthy lease durations (10 years or more for urban offices) provide long-term cash flow visibility.
Market participants should think about office as a pure domestic economic play and with keeping an eye on emerging trends such as shared office space and short term office leases with amenity rich spaces.
Office rents may be expected to rise, on average, with inflation, which will generate reasonably good returns for office owners.
Advantages of Real Estate SCTRs
Correlation and risk-adjusted return metrics demonstrate that listed equity real estate investment trusts provide optimal exposure to the real estate asset class.
Allows investors to take or adjust positions quickly and efficiently by buying and selling positions corresponding to the weights of all constituents which are traded on liquid public markets such as NYSE & Nasdaq.
Provides direct access to institutional office real estate diversified over many geographic areas and management teams without investing in properties or with a real estate equity managers
Portfolio Investment Thesis
Real Estate SCTRs℠ provide tailored solutions for commercial real estate investment management. Main drivers for each real estate SCTR℠:
- Market “cap rates”
- Supply/ demand conditions
- Competition from nearby properties
- Employment growth
- Consumer and business spending
- Interest rates
- Lease revenues
- Property expenses
- Occupancy rates
- Prevailing market rental rates
- Tenant quality and replacement cost