Long term, what are the returns on CRE?
It's well known that the return on a the SP 500 is 7-8% a year. Is there any research on what it is for CRE? With interest rates changing this is a bit harder to calculate. What if you bought the same amount every year, spread it across an index (office buildings, multi family, industrial), what would your avg annual return be? 
[{"id": "d19b0bo", "text": "There is way too much to consider when you say, \"CRE.\" There are a million ways to invest in CRE: REPE firms, REITs, mortgage REITs, industrial properties, medical office properties, retail properties, office properties, publicly-traded brokerage firms. \n\nWhat are you thinking of investing in and someone here from that line of work can probably give you a straight answer.", "replies": [{"id": "d19b6o1", "text": "retail properties and office properties", "replies": [{"id": "d19bcu9", "text": "Then one ballpark figure to use is \"cap rates\" or \"*[capitalization rates](https://en.wikipedia.org/wiki/Capitalization_rate)*\". \n\nThis will vary by location, but in general, anywhere from 2% to 8% is pretty common now-a-days. You can certainly talk to a broker and ask specifically to look at properties with caps over 10%. The catch is that these properties are usually higher risk, and may come with significant deferred maintenance.\n\nThat's for one particular building. If you want an index, look into [REIT](http://www.investopedia.com/terms/r/reit.asp)s. They typically cater towards specific asset classes (hotels, healthcare, office, etc.), so you can just research these on your own until you find one that you like. Like any stocks, these have ups and downs. There is no true \"real estate market\" index that I am aware of, but there are some very large REITs.", "replies": [{"id": "d19e3ox", "text": "The thing with using cap rate is that it represents the unleveraged rate of return. On one hand, this is good because it takes out the variable of different investors' interest rates and loan terms, thereby equalizing different investment properties. On the other hand, cap rate is not the real rate of return (meaning cash-on-cash return) for an investor who uses financing. \n\nYou might have a cap rate of 8% on a given income property, and with financing be earning a 12% return on the equity in the property.  ", "replies": [{"id": "d19kjh6", "text": "Exactly! Of course interest rates change, so this is a very complex calculation.\n\nBasically, one of the main things I'm curious about is if you had $1m dump into stocks vs CRE, which one would produce better returns. ", "replies": [{"id": "d19l3jm", "text": "I'd be likely to do better on a consistent basis with Commercial Real Estate. \n\nThen again, it also takes more active involvement that just dumping the whole million into an index fund. ", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "d19ybp5", "text": "Wow, where is 2%?  I have heard of some apartment complexes in the threes but two is insane. ", "replies": [{"id": "d19zvql", "text": "I guess I'm still a few years behind the times.  I did look it up and there are a few around. In my neighborhood is 14040 N Cave Creek Rd, Phoenix AZ 85022 for sale with a 1% cap rate. That's the lowest I could find around here.", "replies": [{"id": "d1erkh5", "text": "I never understood how some sophisticated investors justify sky high per unit prices which imply sub 4 caps. Ego? Who knows I guess", "replies": [], "depth": 6}], "depth": 5}, {"id": "d1ep7uu", "text": "Manhattan and San Francisco", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "d19hqop", "text": "i'd find some funds investing in those and average them out.  \n\nThe big thing you are missing are there are millions and millions of properties out there.  In the sp500 there are 500 stocks.  \n\nYour question is more like \"well if you invest in businesses what is your return?\".  there is a huge variance there depending if you are buying a set of cutco knives to resell or buying into P&amp;G.  Stock indexes generally go after a specific set that is lower variance.  In CRE there are definitive classes.  If you want to buy long term net leased high security at present time you may be looking 3.5-5 cap.  If you want to invest in a vacant building that needs significant construction and you may sit on it for years to get a tenant, you may be looking 30+cap.  \n\nWhile its easy to look at CRE as one class, it really isn't.  One of the benefits of CRE over other asset classes is it generally lets you balance return and variance fairly well, but often at the loss of liquidity.  This does not make it easy to generalize.  In comparison, res RE is fairly uniform (many many assets that operate nearly the same way) and there are still many debates among top economics researchers about return.", "replies": [], "depth": 3}, {"id": "d19rsmc", "text": "Core assets: Major metros, fully leased, good credit tenants - 4-5%. Core Plus: slightly lower occupancy or tenant credit. Room to inprove occupancy - 6-7%. Value-Add: low occupancy/rents, but potential to improve with buildout, locating tenants, etc. More risky becuase cash flow isn't in place, but higher returns - 8-10%. Opportunistic: developments or buying vacant properties with intent to repositions, inject capital, and market - 10%+.\n\nNone of the above includes leverage, which is the major benefit of real estate. You can borrow at 4-5% and use that increase your returns. Currently, I'm working on value-add deals in the 13%+ return range (IRR), after accounting for disposition.  ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d19uavb", "text": "Vanguard and fidelity both sell REIT index funds. VGSIX and FRXIX are the ticker symbols.  Those would give a pretty decent look into the overall return of real estate.", "replies": [], "depth": 1}]