Employee pension funds are an important part of many California residents' retirement plans. The money that is contributed to a pension fund is invested on an employee's behalf with the goal of returning profits for retirement. In the past few years, pension funds have been investing more money in commercial real estate than they used to.
Many commercial real estate analysts say that the market is maturing, and total returns for commercial real estate investments are expected to decline over the next couple years. Despite this trend, pension funds are continuing to allocate more money to commercial real estate investments. When there have been similar market conditions in the past, institutional investors have turned away from commercial real estate and invested in other markets.
The director of research at Pension Real Estate Association says that pension funds are holding more real estate investments in their portfolios because real estate is now a more mainstream class of alternative asset. According to PREA's annual Investment Intentions Survey, pension funds held an average of 9.4 percent of their investments in commercial real estate at the end of 2015. A spokesman for American Realty Advisors said that institutional investors are looking for more private investments, like real estate, to reach their return objectives in the current low-yield environment.
People may be able to save for retirement by making their own investments in commercial real estate. Depending on a person's goals, a real estate investment could be used to reach long-term retirement goals or generate regular rental profit. Investing in commercial real estate can be a complex undertaking, so people who are considering doing so may want to have the help of an attorney when reviewing a potential transaction.