The case for private U.S. commercial real estate

April 6, 2021 | 14 min read

Arthur Jones

Senior Director, Global Research & Strategy

Jonathan Frank

Manager, Global Research & Strategy

The investment landscape since the Global Financial Crisis (GFC) more than a decade ago has been significantly impacted by a sea change in central bank policies, ushering in a period of unprecedented low interest rates and increased adoption of Keynesian approaches. Post-GFC, the Fed remained very deliberate in its removal of accommodative policy to ensure stronger growth and achieve its inflationary target of roughly 2%. The onset of COVID-19 and subsequent economic recession saw the Fed dust off its GFC playbook by lowering interest rates to the zero bound and rapidly expanding its balance sheet by raising its purchase of bonds.

Risk assets rebounded as central banks flooded markets with liquidity despite the deep recession. Deep liquidity and the assumption of lower discount rates have allowed yield on core, institutional grade assets to stay flat or even compress in some property types despite short-term dislocations in transactions and occupier markets. Income returns—a hallmark of private equity real estate—has also helped stabilize the market, resulting in moderate but positive returns for investors.

With medical solutions now being implemented to mitigate the COVID-19 pandemic, and a nascent global recovery underway, investors are pivoting to optimize their portfolios for the next business cycle, including their tilts within commercial real estate. In this update, we re-examine the ongoing case for private U.S. commercial real estate and conclude that the asset class remains very relevant as an investment opportunity and should remain a key component of any mixed-asset portfolio.

Continued scale and diversity

Despite the turbulence associated with the transaction market over the past year and a subsequent pullback in cross-border inflows, private U.S. real estate remains a highly sought-after destination for global institutional investors. This is particularly true of coastal global markets such as New York, Los Angeles and San Francisco, which continue to rank among the top five destinations for global capital, notwithstanding the current pause in transactions. Moreover, the U.S. commercial real estate market is large, with an estimated market capitalization of just under $14 trillion (as of the end of 2019), accounting for roughly 20% of the investable universe.¹ To put this in context, the value of the U.S. stock and bond markets are $26.4 and $27.7 trillion respectively.² Within the developed world, Europe is a close second with roughly $12.84 trillion in market capitalization, followed by China and Japan adding $6.2 trillion and $3.34 trillion respectively.

Exhibit 1: The U.S. commercial real estate market is deep and diverse
Commercial real estate universe in the U.S.
As of 4Q 2019 (in $ trillions)

Two pie charts showing the commercial real estate share breakdown as of Q4 2019

Federal Reserve, NAREIT, Preqin, CoStar Portfolio Strategy, Barclays , Principal Real Estate Investors.

Furthermore, investors in the U.S. can access a wide array of risk/return strategies across the real estate debt and equity spectrum. The majority of the investment universe is within the private market (82%) with equity investment (direct property ownership) contributing the largest portion (58%) followed by debt investment (direct loans/mortgages) adding the remaining 24%. The balance is split between public debt, commercial mortgage-backed securities (CMBS) and real estate investment trusts (REITs), which account for 8.91% and 8.97% respectively (Exhibit 1 on page 1).³

In addition to its substantial investible universe, the U.S. market is also relatively liquid, as measured by the velocity and volume of transactions (Exhibit 2)—supported by a well-developed and efficient debt market. U.S. transaction volumes, barring the period during the peak of the pre-GFC bubble, have been trending at historically high levels in recent years with a noteworthy share of sales (just around 8%) generated by international investors outside of the U.S.⁴ Since the GFC, these foreign transactions have ranged from 7% just following the recession to a peak of 17% led by mainland China investors. Even with the shift in investment, the more recent flow of international capital is meaningful in its contribution to the depth of the market and is perhaps more in-line with historical norms.

Exhibit 2: U.S. commercial real estate sales trend upward on a long-term basis
As of January 2021

Bar chart showing the U.S. commercial real estate trending upward on a long-term basis, from 2001 to 2020

Real Capital Analytics, Cross-Border Compendium.

Breadth of investments is another constructive feature of the U.S. private real estate market. The sheer size and variety of the U.S. economy provides both regional and economic diversities from the tech-focused markets in the Northeast and Northern California, to metropolitan areas with outsized demographic growth in the Southeast and Southwest regions that take advantage of both business and household migration due to lower costs and warmer weather. Older and more established coastal markets like New York, with its focus on finance; Chicago, known for infrastructure and corporate headquarters; and Washington DC, which serves as a seat of global political power, all offer diverse industrial and commercial real estate drivers across various property types.

Growth in alternative sectors

Private commercial real estate in the U.S. has long been thought of by investors as the four, or perhaps five, major property types: hotel, industrial, office, multifamily and retail. Though these sectors continue to comprise a lion’s share of institutional portfolios according to data from the NCREIF research database (94.8% as of Q4 2020), the growth of other niche properties over the past decade has been significant.⁵

To put into perspective, “other” property types (properties not classified as a subtype under the five major sectors) accounted for just 2% of all investment properties in 2010. Fast-forward 10 years and that proportion has more than doubled to 5.2% of total. In terms of value, niche and other property types have increased from just over $5 billion in 2010 to over $40 billion by the end of 2020 (Exhibit 3).

Exhibit 3: Alternatives to major property types are on the rise

Chart showing the rise of alternative to major property types from 2010 to 2020

NCREIF Query Tool; Principal Real Estate Investors, Q4 2020.

For its part, the private market is somewhat behind the curve—but catching up quickly—as public markets have long been active participants in niche sectors such as data centers, cold storage facilities, seniors housing, medical office, and self-storage. As a result, private benchmarks such as the NPI and ODCE have a way to go before there are better and more granular data on the sectors. There is little doubt, however, that these smaller but expanding sectors will offer more depth and diversity as they expand through the next decade.

Investment performance provides a compelling argument

Despite whatever compelling arguments may be made regarding liquidity, stability or diversity, the goal for asset managers is to deliver a portfolio strategy that offers attractive returns to their clients. On both a risk-adjusted and absolute basis, U.S. private real estate has a proven track record. Since its inception in 1978, the NCREIF NPI has shown that U.S. commercial real estate has historically been one of the better performing asset classes. While U.S. stocks have delivered top performance (12%), private commercial real estate hasn’t been far behind delivering a compounded average annual total return of 8.8% since data started being tracked in 1978 (Exhibit 4). One of private real estate’s greatest attributes, however, is its ability to provide stable and consistent income returns to investors, which acts as governor on volatility through business cycles. Like the coupon payments from a bond, most of commercial real estate’s return is generated through income derived from rental payments on long-term leases. As a result, real estate has not only outperformed many other assets classes’ income return component, but has also done so with much less volatility over the measured time horizon. This relatively stable and consistent return characteristic is highly valuable to income-seeking investors.

Exhibit 4: Commercial real estate performance holds its own as an asset class

Bar graph displaying commercial real estate performance by total return percentage

NCREIF, Barclays, Federal Reserve , MSCI, INREV, ANREV, Bloomberg, Principal Real Estate Investors, Q4 2020.

* Data only goes back to Q1 2000
** Data only goes back to Q4 1994
*** Data only goes back to Q4 2004

The income component of real estate is perhaps as important in today’s environment than ever. Due in part to the accommodative stance of major global central banks including the Fed, and increased global investor demand for low risk assets, the term structure of the yield curve has been relatively flat, compressing spreads on fixed income investments to historic lows. Yields on commercial real estate assets (best represented by its capitalization rate), however, have not only remained one of the more attractive among asset classes in the current economic cycle, they have also held up well relative to other asset classes with respect to their historical average (Exhibit 5).

Exhibit 5: Real estate yields are holding up well on a relative basis

Bar graph showing real estate yield in percentages by asset class

NCREIF, Barclays, Bloomberg , Federal Reserve, Principal Real Estate Investors, Q4 2020.

While some of U.S. commercial real estate’s income yield can be attributed to its illiquidity premium, a large portion can be explained by rent growth, occupancy levels, and long-term leasing agreements that help lock in stable income returns—even through periods of negative economic growth.

Commercial real estate as an inflation hedge

Recently, inflation hawks have rekindled fears of an overheated economy and the return of inflation as additional rounds of fiscal stimulus checks have hit household bank accounts. Such fears generally conjure images of the damaging inflation that occurred in the late 1970s and early 1980s when price increases outpaced both economic and wage growth, ultimately leading to a soft investment environment and a series of damaging recessions. While it’s true that nascent inflationary pressures are indeed evident, our view is that they are more likely transitory given underlying trends in worker productivity, wage growth and uncertainty on the future velocity of money. In most cases where we see inflation today, it is more likely caused by short-term disruptions in the supply chain and depleted inventory levels—which tend to ebb and flow during periods of economic flux.

For its part, unanticipated inflation creates problems for real estate investors, such as cost overruns on new development; overages on operating expenses; and more costly tenant improvement packages. Real estate, however, is unique among most other asset classes in that much of its return is derived from income that is generated from longer-term leases (with the notable exception of hotels). Income is often indexed to inflation with escalator clauses built into leases that are tied to CPI inflation, which protect income. This is particularly true for office and industrial leases where leases run between five to 10 years, while shorter leases in retail and multifamily may also offer benefits through the pooling effect from multiple tenants within a single asset.

Perhaps most important, the performance data are conclusive. Commercial real estate returns have historically outpaced inflation offering excess return 87.5% of the time based on quarterly returns since 1980 across all property types (Exhibit 6). What is also apparent is that periods where commercial real estate underperformed inflation are not random and have only occurred during and following significant recessions. The first was following the Savings and Loan crisis in the early 1990s, where rampant speculation within the real estate sector and shoddy lending practices caused both a business cycle downturn and a correction in property values. The second followed the GFC a decade ago when the recession resulted high levels of distressed sales that also undermined property values. It is important that during both periods, inflation was either tracking at low levels, or declining rather than accelerating.

Exhibit 6: Inflation is no match for commercial real estate performance
(Q1 1979 - Q4 2020)

Bar graph showing the inflation resistance of commercial real estate by comparing interest rates to total returns from 1979-2020

NCREIF NPI, Federal Reserve, Principal Real Estate Investors, Q4 2020.

In fact, commercial real estate performance can be shown to have a positive correlation with inflation. This is partially due to asset inflation or increases in capital values that occur during periods where price increases are high, as well as the ability to increase income based on leasing structure. But not all property types are created equal—office and multifamily having the strongest correlation, with retail and hotel having the weakest outperforming inflation in 73.3% of all quarters since 1980.

Lower volatility, better risk-adjusted returns

When compared to higher beta risk assets, such as stocks and even REITs, commercial real estate is a comparatively low-risk and high return option. When defining risk of an asset, it is frequently quantified as the degree to which the return varies from period-to-period—the term standard deviation or volatility is commonly used. When calculating commercial real estate’s volatility against other asset classes, it is less risky (7.40% vs 12.42% average), and its return per unit of risk (i.e. return-to-risk ratio) is almost equal to that of short-term cash, which is often considered risk-free. This high reward to risk tradeoff is convincing, however, one of its most persuasive arguments comes with its addition to a well-diversified investment portfolio.

Exhibit 7: U.S. commercial real estate returns are attractive on an absolute and risk-adjusted basis
(Q1 1978 - Q4 2020)

Bar graph showing commercial real estate with absolute and adjusted risk from 1978-2020

NCREIF, NAREIT, Barclays, Federal Reserve, MSCI, INREV, ANREV, Bloomberg, Principal Real Estate Investors, Q4 2020.

* INREV data back to index inception, Q1 2000
** MSCI ACWI ex. US data back to index inception, Q4 1994
*** ANREV data back to index inception, Q4 2004

Commercial real estate continues to improve portfolio outcomes

A well-held belief in finance is that a properly diversified portfolio of multiple assets will allow investors to gain a greater return for each unit of risk taken. In deciding this optimal allocation of investment funds, an asset’s risk-return profile, as well as its correlation with other assets, plays an important role in this decision.

Using the quarterly annual total returns of seven asset classes (Cash, U.S. Bonds, U.S. Stocks, Global Stocks ex. U.S., Pan-Asia commercial real estate, E.U. commercial real estate, U.S. commercial real estate) from Q4 1978 to Q4 2020, Exhibit 8 displays the optimal investment portfolios constructed on risk-return basis (as shown on page 7). The upper line (purple) outlines the highest return for each level of risk taken in a portfolio that includes all asset class options mentioned above while the lower line (blue) displays the same frontier of assets, but with U.S. commercial real estate removed as an investment choice. What this illustrates is that adding any allocation of U.S. commercial real estate to a portfolio already invested in some combination of global stocks, bonds, cash, and non-U.S. commercial real estate increases the portfolio’s overall return while also reducing its risk. For example, looking at portfolios A and B outlined below, if an investor wanted to construct the highest historical return portfolio choosing a level of 4.8% risk, a portfolio comprised of bonds, cash, U.S. stocks, and Pan-Asia commercial real estate would yield an expected return of 7.2%. At that same level of risk, however, if the investor added U.S. commercial real estate in the portfolio construction, they would have been able to achieve roughly a 150 basis point increase in the portfolios return (8.7%). Moreover, this example also reveals that an investor wanting to take the least amount of risk possible would be better served not investing entirely in short-term cash (traditionally considered risk-free). Portfolio C in the diagram reveals that an allocation of 25% in bonds, 14% U.S. commercial real estate, 3% international equities, and the remainder in cash would have achieved a 3.7% level of risk compared with 4.2% entirely invested in short-term cash. This allocation would also have realized an average annual return of 6.3% versus 5.0%.

Exhibit 8: Optimal portfolio asset frontiers with and without U.S. commercial real estate

Scatter plot displaying optimal portfolio asset frontier with and without U.S. commercial real estate

NCREIF, NAREIT, Barclays, Federal Reserve, INREV, ANREV, Bloomberg, Principal Real Estate Investors, Q4 2020.

* INREV data back to index inception, Q1 2000
** MSCI ACWI ex. US data back to index inception, Q4 1994
*** ANREV data back to index inception, Q4 2004

Conclusion

While it may appear that the global investment landscape calls for a more cautious risk-off approach, as evidenced by historically low yields on long-dated sovereign bonds, asset classes that dampen volatility, reduce correlation to global markets and generate income, remain at the forefront for prudent investors. At its core, U.S. commercial real estate is an asset class that can benefit from positive economic fundamentals and demographics which should be positive attributes as recovery from COVID-19 accelerates in the coming quarters. Regional diversity within the U.S. economy— across metro areas—and the potential for lower correlation across certain markets that may not be as closely tied to broader macroeconomic cyclical events offers investors further diversification benefits. Additionally, with the stability of its income return, U.S. commercial real estate has the potential to provide attractive risk-adjusted returns allowing investors to take advantage of increased returns and reduced risk of a well-diversified portfolio.

¹ CoStar Portfolio Strategy (2019).
² Market Value Capitalization of the Wilshire 5000 (US Stocks) and the Barclays/Bloomberg US Aggregate, YE 2019.
³ Source: Federal Reserve, NAREIT, Preqin, CoStar Portfolio Strategy.
⁴ Real Capital Analytics, Cross Border Compendium, November 2020.
⁵ Based on data from NCREIF Query Tool, NCREIF Research Database, Q4 2020 for all properties in NPI or ODCE. NCREIF ODCE Attribution based on NPI assets held in open-ended funds is reported at 95.3%.

Exhibits 4, 5, 7 and 8: The S&P 500 is a market-capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market; The NCREIF Property Index (NPI) is a quarterly, unleveraged composite total return for private commercial real estate properties held for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors and held in a fiduciary environment; The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency). (Future Ticker: I00001US); Cash: LIBOR 1-Month Rates: U.S. Dollar Denominated Deposits- The ICE LIBOR is the primary benchmark for short-term interest rates globally, used for mortgages, loans, for interest rate contracts on futures and options exchanges, and as a general gauge of the health of financial monetary markets; REITS: FTSE NAREIT All REITs (FNAR)- The FTSE NAREIT All REITs Index is a market capitalization-weighted index that and includes all tax-qualified real estate investment trusts (REITs) that are listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market List. The FTSE NAREIT All REITs Index is not free float adjusted, and constituents are not required to meet minimum size and liquidity criteria.

ANREV TR (USD): The ANREV Total Return (TR) Index is a quarterly value weighted benchmark that measures the net asset value performance of Asia Pacific non-listed real estate funds. Performance is measured net of fees and costs, and unhedged total returns are then converted from local currency to USD.

INREV TR (USD): The INREV Total Return (TR) Index is quarterly value weighted benchmark that measures the net asset value performance of European non-listed real estate funds. Performance is measured net of fees and costs, and unhedged total returns are then converted from local currency to USD.

MSCI ACWI ex U.S. (TR – MXWU): The MSCI ACWI ex USA Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries. (excluding the US) and 27 Emerging Markets (EM) countries. With 2,344 constituents, the index covers approximately 85% of the global equity opportunity set outside the US, and is market-capitalization-weighted of the Gross total returns denominated in USD.

CRE Cap Rates: The capitalization rate calculated from the NCREIF Property Index (NPI)

REIT Income Ret: Income Return from the FTSE Nareit All REITs index

AAA Corp. Bonds: Moody’s Not Seasonally Adjusted Aaa Corporate Bond Yield [AAA], retrieved from FRED, Federal Reserve Bank of St. Louis Barclays U.S.

Aggregate Bonds: Income return from the Bloomberg Barclays US Aggregate Total Return Value Unhedged USD

U.S. 10-Year Treasury: US Department of Treasury, closing market bid yields on the 10 year US Treasury security.

S&P Income Ret: Income return from the S&P 500 Total Return Index (Internal Calculation). To note, every index in the paper is on end of period quarterly basis.

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Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. Potential investors should be aware of the risks inherent to owning and investing in real estate, including value fluctuations, capital market pricing volatility, liquidity risks, leverage, credit risk, occupancy risk and legal risk.

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Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision. You should consider whether an investment fits your investment objectives, particular needs and financial situation before making any investment decision.

Access to this website and its content is only permitted for “institutional investors” in Singapore within the meaning given to that term in section 4A of the Securities and Futures Act 2001 (“Act”) or “Professional Investors” in Hong Kong within the meaning given to that term under the Securities and Futures Ordinance. It is not intended for any retail investors.

The website may contain information on funds that are registered as restricted schemes under the Sixth Schedule to the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations in Singapore. The offer, holding and subsequent transfer of shares are subject to restrictions and conditions stipulated under the Act and the units in those funds are not allowed to be offered to the retail public. The shares of these funds are being offered only on the basis of the information contained in the relevant Information Memorandum. The Information Memorandum is not a prospectus as defined in the Act and accordingly, statutory liability under the Act in relation to the content of prospectuses does not apply. The Monetary Authority of Singapore has not, in any way, considered the investment merits of the funds and assumes no responsibility for the contents of the website and/or that of the Information Memorandum.

It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction. If you are not an “institutional investor” in Singapore or a “Professional Investor” in Hong Kong you may not access this website and you should select the “I Do Not Accept” button below.

By selecting the “Accept” button below, and entering this website, you are representing and warranting that the applicable laws and regulations of your jurisdiction allow you to access the website and that you have agreed to these terms and confirm and represent that you are an “institutional investor” in Singapore or a “Professional Investor” in Hong Kong."

Principal Global Investors (Australia) Ltd. (ABN 45 102 488 068, AFS Licence No. 225385) ("we", "us", "our") is regulated by the Australian Securities and Investments Commission.

The information in this website, and on pages linked by this website, is general information only and is not intended to constitute financial product advice or a recommendation to buy, sell or hold any particular security or investment. It does not take into account any investor's investment objectives, particular needs or financial situation. Any investor should consider whether an investment fits their investment objectives, particular needs and financial situation before making any investment decision.

While the information on this website is updated from time to time, it is subject to change in the intervening period. None of Principal Global Investors (Australia) Limited or its related entities (together "Principal") guarantee the accuracy, completeness or timeliness of the information on this website. Information may become outdated and opinions may change, including as a result of new information becoming available or changes in the markets. To the extent permitted by law, Principal does not accept any responsibility arising in any way (including by reason of negligence) for errors in, or omissions from, this information.

We offer financial products only to wholesale investors (as defined in sections 761G and 761GA of the Corporations Act) and to persons investing through an investor directed portfolio service under the product disclosure statements that can be accessed from this website.

The information contained in this website is intended only for Australian residents and investors and is not intended for use in any country or jurisdiction where such use would constitute a violation of law. There is no intention to offer or sell products in countries or jurisdictions where such offer or sale would be unlawful under the relevant domestic law.

Protecting Your Privacy

At Principal Global Investors (Australia) Ltd, we give priority to protecting the privacy of your personal information. We do this by handling personal information in a responsible manner and in accordance with the Privacy Act 1988 (Cth).

If it is reasonable and practicable to do so, we collect personal information directly from you. How we collect your information will depend upon how you interact with us. We may collect it through application forms, telephone, email and internet contact, from correspondence with you or your consultant and in person.

The information collected may include what time you visited our website, how long you were on our site, if you've been to the site before, what web pages you visited, and what type of browser you used to access our website. This information is collected through the use of cookies.

Use of cookies on this site is outlined in the Principal Online Privacy Policies, Information Collected by Use of Cookies and Spotlight Tags. In accepting these terms and conditions, you accept the terms of the use of cookies from this site. You can configure your browser to accept all cookies, reject all cookies, or notify you when a cookie is sent. Refer to your browser instructions or help screens to learn about these functions. If you reject all cookies, you may not be able to use our web sites.

We may collect, hold and use personal information in order to process applications, administer the investments and provide related services. If you do not provide your personal information to us, we may not be able to process and administer your investment. We may also use your personal information to tell you about other products and services offered by us or other members of the Principal Financial Group. Please contact us if you do not wish to receive this ongoing information.

We may disclose your personal information to other related companies within the Principal Financial Group®, agents and other external service providers (who supply administrative, financial or other services), some of which are located overseas. Where this occurs, we take steps to protect personal information against misuse or loss however you should be aware that in the event the overseas recipient fails to handle the personal information consistently with the Australian Privacy Principles, we will not be accountable under the Privacy Act and you will not be able to seek redress under the Act. The countries this information may be disclosed to will vary from time to time, but may include Brazil, Chile, China, Hong Kong, India, Japan, Malaysia, Singapore, the United Kingdom and the United States and other countries where the Principal Financial Group® has a presence. A list of locations in which the Principal Financial Group® operates can be found at https://www.principal.com/about-us/our-company/company-overview/worldwide-locations. Our Privacy Policy contains information about how you can gain access to the personal information that we hold about you and seek correction of that information, subject to certain exemptions under law. Our Privacy Policy also contains information about how you may raise concerns regarding privacy with us and how we will deal with your concerns.

You can obtain a copy of our Privacy Policy by clicking on the link below:

Privacy at Principal Global Investors (Australia) Limited

By clicking "Accept", you consent to us dealing with your personal information in the manner set out in our Privacy Policy. You also acknowledge and understand that by providing such consent that we will not be required to take such steps as are reasonable in the circumstances to ensure overseas recipients of your personal information comply with the Australian Privacy Principles.

"Principal Financial Group is a global organization that operates in many different jurisdictions worldwide. Principal Financial Group’s diversified group of companies and affiliates provide comprehensive asset management solutions for institutional investors, investment funds and individuals in key markets around the world. Principal Financial Group has investment offices in the United States, [Mexico, South America, Europe, the Middle East, and throughout Asia]. Where appropriate, Principal Financial Group entities are registered with appropriate regulatory authorities in the jurisdictions in which they are required to be registered to carry on their respective business activities.

All products or services provided to you by any Principal Financial Group company shall only be available in the jurisdiction(s) within which the company providing the product or service is authorized to operate. The relevant Principal Financial Group company reserves the right to make the final determination on whether or not you are eligible for any particular product or service. If you choose to enter a website outside your country of residence, you are advised that it may not be legal in that jurisdiction for you to access or use the facilities available on that Site and the legal requirements of that jurisdiction may prohibit you from dealing or otherwise transacting in that jurisdiction.

Principal Financial Group makes no representation that the content of the site is appropriate for use in all locations, or that the transactions, securities, products, instruments or services discussed at this site are available or appropriate for sale or use in all jurisdictions or countries, or by all persons and entities. Nothing on this website shall be considered a solicitation for the offering of any investment product or service to any person in any jurisdiction where such solicitation or offering may not lawfully be made.

You may view, download for caching purposes only, and print content from the website for your own personal use, subject to the restrictions set out below and elsewhere in these Terms of Use.

No Guarantee of Timeliness
This website may contain videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions. The information and materials contained on this website, and the terms, conditions, and descriptions that appear, are subject to change. All content on this website is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

No Warranties
The information on this website has been developed internally and/or obtained from sources believed to be reliable; however Principal Global Investors and its affiliates do not independently verify or guarantee its accuracy or validity. The information and services provided on this website are provided ""AS IS"" and without warranties of any kind, either expressed or implied. To the fullest extent permissible pursuant to applicable law, Principal Global Investors disclaims all warranties, including, but not limited to, any warranty of non-infringement of third-party rights and any implied warranties of merchantability and fitness for a particular purpose. Principal Global Investors does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained on this website and does not warrant that the functions contained in this website will be uninterrupted or error-free, that defects will be corrected, or that the website will be free of viruses or other harmful components. Principal Global Investors expressly disclaims all liability for errors and omissions in the materials on this website and for the use or interpretation by others of information contained on the website. Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions on this website.

If you have questions, please email us.

Click ""Accept"" to indicate your acknowledgement and acceptance of Principal Global Investors Terms of Use and to continue."

"These Terms & Conditions explain certain legal and regulatory conditions and restrictions in relation to the Principal Global Investors (Europe) Limited website, and in relation to the Principal Global Investors Funds (‘the Funds’). This information may be changed by Principal Global Investors at any time without notice.

In these terms and conditions, references to 'Principal Global Investors' means Principal Global Investors (Europe) Limited or any affiliate of the Principal Financial Group, Inc. or Principal Global Investors, LLC.

Before you proceed, you must acknowledge that you have read, and agree to, our terms and conditions.

Information in relation to the Principal Global Investors Funds is available through this web site to institutional investors resident in the following countries of: Belgium, France, Finland, Germany, Guernsey, Ireland, Italy, Jersey, Netherlands, Spain, Sweden, Switzerland and the United Kingdom. By proceeding this far you are representing and warranting that you are an institutional investor resident in one of these countries. Not all of the Funds are available in all these jurisdictions, and investors are directed to the Country Registration document for detailed information . What follows is not an offer or invitation to acquire an investment to, and should therefore not be relied upon by, any person anywhere other than the countries noted. Persons in respect of whom such prohibitions apply must not access this web site. This web site is reserved exclusively for non-U.S. persons and should not be accessed by any person in the United States.

Yes, I certify to be an institutional investor and resident of a country listed above.

Cookies
Use of cookies on this site is outlined in the Privacy and Security Policy. In accepting these terms and conditions, you accept the terms of the Cookie Policy and the use of cookies from this site.

Legal Entity Disclosure and Regulation
In Europe by Principal Global Investors (EU) Limited, Sobo Works, Windmill Lane, Dublin D02 K156, Ireland. Principal Global Investors (EU) Limited is regulated by the Central Bank of Ireland.

In the United Kingdom by Principal Global Investors (Europe) Limited, Level 1, 1 Wood Street, London, EC2V 7 JB, registered in England, No. 03819986, which is authorised and regulated by the Financial Conduct Authority (“FCA”).

In Switzerland by Principal Global Investors (Switzerland) GmbH. This website is considered as advertising and information contained herewith be treated as such. Investors can obtain free of charge the prospectus, trust deed, the prospectus, the key investor information document (KIID), and the annual and semi-annual reports from the representative in Switzerland.

In Europe and United Kingdom, this website is directed exclusively at Professional Clients and Eligible Counterparties and should not be relied upon by Retail Clients (all as defined by the MiFID and FCA respectively). If you are viewing the material as a retail investor, you should seek independent investment advice before deciding whether the products and services in question are suitable to meet your investment needs and objectives, as the language has not been complied to a retail client standard.

Principal Global Investors Funds
Principal Global Investors (Ireland) Limited is the issuer of the Funds. Investments may only be made on an application form attached to a current prospectus and following receipt by the investor of the KIID in respect of the Fund in which they intend to invest. The latest version of the prospectus of the Funds is dated 14 December 2012.

For Real estate investors in the European Economic Area (“EEA”), this website and the information on it is only directed at persons who are professional investors for the purposes of the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”), professional clients or eligible counterparties for the purposes of the Markets in Financial Instruments Directive (Directive 2014/65/EU) (“MiFID II”) or as otherwise defined under applicable local law and regulation and at whom this website and the information on it may lawfully be directed in any relevant jurisdiction (“Eligible Persons”). In relation to each member state of the EEA (“Member State”) which has implemented AIFMD (and for which transitional arrangements are not/ no longer available), this website may only be accessed and interests in Funds may only be offered or placed in a Member State to the extent that: (i) the relevant Fund is permitted to be marketed to professional investors in the relevant Member State in accordance with AIFMD (as implemented into the local law/regulation of the relevant Member State); or (ii) this website and its information may otherwise be lawfully distributed and the interests in Funds may otherwise be lawfully offered or placed in that Member State (including at the initiative of the investor). In relation to each Member State of the EEA which, at the date of accessing this website, has not implemented AIFMD, this information may only be distributed and interests in Funds may only be offered or placed to the extent that this information may be lawfully distributed and the interests in Funds may lawfully be offered or placed in that Member State (including at the initiative of the investor).

Persons who are not Eligible Persons, including but not limited to those individuals or other persons who fall within the FCA’s definition of ‘retail clients’, should not use or rely upon this website or the information contained therein and may not engage the services of Principal Real Estate or any of its affiliates, or invest in any Fund. Potential investors are advised that all or most of the protections provided by the UK regulatory system will not apply and that the UK Financial Services Compensation Scheme may not be available in relation to an investment in a Fund or separate account.

The contents of this website have not been verified or approved by any competent regulatory or supervisory authority. No liability, whether in negligence or otherwise, arising directly or indirectly from the use of the information or any part of it on this website is accepted and no representation, warranty or undertaking, whether express or implied, is or will be made at any time by Principal Real Estate or its affiliates or any of their respective advisers, directors, officers, employees, representatives or other agents (“Principal Agents”) for any information or any of the opinions contained herein or for any errors, omissions or misstatements.

None of Principal Real Estate or its affiliates or any Principal Agents makes or has been authorised to make any representation or warranties, whether express or implied, in relation to Principal Real Estate or regarding the truth, accuracy or completeness of any of the information contained on this website at any time. No representation or warranty is given by Principal Real Estate, its affiliates or the Principal Agents as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in the information on this website. Furthermore, nothing contained on this website is or should be relied on as a promise or representation as to the future. No reliance may be placed by any person for any purpose whatsoever on the information or opinions contained on this website or on its completeness, accuracy or fairness at any time.

Principal Global Investors (Europe) Limited is not authorised by the FCA to directly deal with retail investors; any distribution of the Fund to retail investors in Europe is facilitated by fund distributors with which Principal Global Investors (Europe) Limited has entered distribution arrangements, pursuant to advice provided to investors by those distributors, based on the documents Principal Global Investors (Europe) Limited provides. Retail investors should not be provided with access to this website.

The name of the Swiss representative is ACOLIN Fund Services AG, Stadelhoferstrasse 18, CH-8001 Zürich. The name of the Swiss paying agent is Banque Cantonale de Genève, 17, quai de l’Ile, 1204 Geneva. Investors can obtain the prospectus, trust deed, the simplified prospectuses and the annual and semi-annual reports free of charge from the representative in Switzerland.
The value of units and the income from them may fall as well as rise.

Investments in the Funds are neither insured nor guaranteed by the US Government or the Federal Deposit Insurance Corporation and are not deposits or obligations of, or guaranteed by, Principal Global Investors.

No Solicitation
Nothing contained in this website shall constitute an offer or solicitation, in relation to units in the Funds or generally, in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised.

In particular, shares issued by the Company, and units in the Funds, have not been and will not be registered under the United States Securities Act of 1933 as amended or the securities laws of any state or political subdivision of the United States and may not, except in a transaction which does not violate US securities laws, be directly offered or sold in the United States or to any US Person. The Company will not be registered under the United States Investment Company Act of 1940 as amended.

This website is reserved exclusively for non-US persons and should not be accessed by any person in the United States.

No Investment Advice
The information in this website contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such nor should it be construed as specific investment advice, an opinion or recommendation. The general information it contains does not take account of any investor’s investment objectives, particular needs or financial situation, nor should it be relied upon in any way as a forecast or guarantee of future events regarding a particular investment or the markets in general. Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision.

You should also inform yourself as to (a) the possible tax consequences, (b) the legal requirements and (c) any foreign exchange restrictions or exchange control requirements which you might encounter under the laws of the countries of your citizenship, residence or domicile and which might be relevant to any investment, including the subscription, holding, transfer or disposal of units in the Funds

Delegation of Investment Management to Affiliates

Products upon which composite results contained in this material, if any, are based may not themselves be available in the United Kingdom and certain other jurisdictions; however, the underlying investment management capability can be made available to institutional investors subject to all applicable local regulations and restrictions. In connection with its management of client portfolios, PGIE may delegate management authority to affiliates that are not authorised and regulated by the Financial Conduct Authority. In any such case, the client may not benefit from all protections afforded by rules and regulations enacted under the Financial Services and Markets Act 2000.

Disclaimer
The information on this website is given by Principal Global Investors in good faith and has been derived from sources believed to be reliable and accurate as at their date. However, Principal Global Investors makes no representation or warranty of any kind for the accuracy or completeness of the information and it is under no obligation to update or correct any errors in the information after the date of publication. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions.

Subject to applicable law, Principal Global Investors and its affiliates and their respective directors, employees and associates do not accept any responsibility arising in any way (including by reason of negligence) for errors in, or omissions from, the information and do not accept any liability for any loss or damage, however caused, as a result of any person relying on any information on the website or being unable to access the website.

The Internet is not a totally reliable and secure medium of communication. Principal Global Investors accepts no liability for the security or confidentiality of information transmitted in this way and any such transmission of information shall be at your own risk.

The entire content of this website is subject to copyright with all rights reserved. You may not copy, reproduce, distribute or modify the content of this website without the prior written permission of Principal Global Investors.

No instructions for investment purposes will be accepted directly from this website or by e-mail.

If you accept these terms and conditions, click ""Accept."""

You are about to leave PrincipalAM.com and be directed to our Japanese site, PrincipalGlobal.jp. If you wish to proceed, please click "Accept." If you would like to stay on PrincipalAM.com, please click "I do not accept."

You may view, download for caching purposes only, and print content from the website for your own personal use, subject to the restrictions set out below and elsewhere in these Terms of Use.

No Guarantee of Timeliness
This website may contain videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions. The information and materials contained on this website, and the terms, conditions, and descriptions that appear, are subject to change. All content on this website is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

No Warranties
The information on this website has been developed internally and/or obtained from sources believed to be reliable; however Principal Global Investors and its affiliates do not independently verify or guarantee its accuracy or validity. The information and services provided on this website are provided ""AS IS"" and without warranties of any kind, either expressed or implied. To the fullest extent permissible pursuant to applicable law, Principal Global Investors disclaims all warranties, including, but not limited to, any warranty of non-infringement of third-party rights and any implied warranties of merchantability and fitness for a particular purpose. Principal Global Investors does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained on this website and does not warrant that the functions contained in this website will be uninterrupted or error-free, that defects will be corrected, or that the website will be free of viruses or other harmful components. Principal Global Investors expressly disclaims all liability for errors and omissions in the materials on this website and for the use or interpretation by others of information contained on the website. Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions on this website.

If you have questions, please email us.

Click ""Accept"" to indicate your acknowledgement and acceptance of Principal Global Investors Terms of Use and to continue."

"Principal Global Investors, LLC, the issuer of this website, is a branch registered in the Dubai International Financial Centre and is authorized by the Dubai Financial Services Authority as a representative office.

This website contains general information only on investment matters and nothing in this website is intended to constitute or form part of any offer or inducement to issue or sell, or any solicitation of any offer to subscribe for or purchase, any securities or investment products in the UAE (including the Dubai International Financial Centre) and accordingly should not be construed as such. Information in this website is not directed at you if we are prohibited by any law of any jurisdiction from making the information on this site available to you and is not intended for any use that would be contrary to local law or regulation. Products or services mentioned on this site are subject to legal and regulatory requirements in applicable jurisdictions and may not be available in all jurisdictions. Accordingly persons are required to inform themselves of and observe any such restrictions.

The information in this website is being made available on the basis that the recipient acknowledges and understands that the entities and securities to which it may relate have not been approved, licensed by or registered with the UAE Central Bank, the Dubai Financial Services Authority or any other relevant licensing authority or governmental agency in the UAE or elsewhere in the Middle East.

The information in the following website should not be construed as investment advice or a recommendation for the purchase or sale of any security. The value of investments and the income from them may fall as well as rise. Principal Global Investors, LLC and the other member firms of Principal Global Investors (collectively, the ""Firms"")* do not guarantee any investment results and there can be no assurance that the strategies employed will improve investment performance, and make no guarantee that a client's investment objectives will be achieved and no warranties or representations, expressed or implied, are made by the Firms concerning the benefits of these strategies discussed herein. The information in this website has been developed internally and/or obtained from sources that the Firms believe to be reliable; however, the Firms do not guarantee the accuracy, adequacy or completeness of such information and are not responsible for any errors or omissions. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions.

This website contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The information it contains does not take account of any investor's investment objectives, particular needs or financial situation. Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision. You should consider whether an investment fits your investment objectives, particular needs and financial situation before making any investment decision.

Nothing in this website should be construed as investment, tax, legal or other advice.

The content of this website has not been approved by or filed with the UAE Central Bank or Dubai Financial Services Authority.

Access to this website is only permitted for ""sophisticated institutional investors/professional clients"". If you are not a ""sophisticated institutional investor/professional client"", you may not access this website and you should select the ""Decline"" link below.

By selecting the ""Accept"" button below, and entering this website, you agree to these terms and confirm and represent that you are a "" sophisticated institutional investor/professional client""."