Abstract
Given the paucity of good international unsecuritized real estate data and the growing interest in diversifying real estate only and mixed‐asset portfolios beyond national borders, this study introduces an unsecuritized Japanese total return index for office real estate dating back to 1970. Moreover, this study analyses risk and return characteristics and compares them with the risk and return characteristics of US domestic unsecuritized office real estate. The results indicate that first, National Council of Real Estate Investment Fiduciaries (NCREIF) and the Mitsubishi Trust and Banking Corporation and IKOMA Data Service System Co. Ltd (MTB‐IKOMA) geographic region returns are generally from a normal distribution, although neither is without exception; second, all ten sub‐indices suffer from autocorrelation at two or three lags even after lower‐order effects have been removed; third, returns in Japan are historically higher, although so too are the risks; and most importantly fourth, while returns within Japan and the USA, separately, are highly correlated, correlation between Japan and the USA is quite low. In sum, given the results of this study, it is likely that Japanese unsecuritized real estate could be used to diversify international real estate only, and mixed‐asset portfolios.
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