Published May/June 2012
Remember back when we paid for everything using paper bills and tiny hunks of metal? These days, pulling cash out of your wallet to pay for your morning coffee draws the same kind of quizzical looks once reserved for people who wrote checks.
Cash may still be king in the world of finance, but money—the kind you can hold in your hands—is on the verge of being toppled by a plastic card coup d’état. Who wants to try to keep track of all those wadded up bills and heaps of change when you can pay for everything with a simple swipe?
But just because we’re paying with cards instead of cash, it doesn’t mean that money isn’t changing hands. The medium of exchange may have changed, but the underlying transaction remains the same.
The world of real estate investment has witnessed a similar shift, albeit not on nearly the same scale. Institutions such as pension plans and defined benefit retirement funds that once held real estate directly in the form of hard, tangible assets are upping their allocations to securitized real estate. In doing so, they’re diversifying their portfolios with the benefit of liquidity and transparency.
They may be buying shares of REIT stocks, but they’re buying real estate nonetheless.