Abstract
The paper argues that a balanced real estate portfolio ought to extend the concept of diversification beyond the traditional sector and geographical approach to include a consideration of lease profile. While sector and geography are clearly important diversification factors, investment decisions need to take account of the wider risk profile and results can be counter-intuitive because of the mediation role of supply on economic and other market drivers of property performance. Lease profile offers a further diversification route and in this context the paper revisits the reasons why lease lengths have changed and the place of (and potential for) long income property in balanced institutional portfolios. The article also considers the implications of new accounting rules and how these might limit use of such property in real estate portfolios.
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