Commercial Real Estate Derivatives: The Developing U.S. Market

  • October 14, 2007
  • • Written by: Jim Clayton, Ph.D. 

Fall 2007, Vol. 32, No. 2

Absract: Over the past decade, U.S. institutional real estate has evolved into a dynamic, more widely accepted mainstream asset class. The securitization revolution of the 1990s helped produce today’s robust public real estate investment trust (REIT) and commercial mortgage-backed securities (CMBS) markets. The commercial property derivatives market continues to evolve, and investors are keeping a close eye on this innovation. They want to determine if this new way to gain exposure to the real estate asset class and hedge private real estate risk will materialize and revolutionize the institutional real estate world, as it has in stock and bond markets around the world. Having a basic understanding of commercial property derivatives and the indices upon which contracts are written is important, even for real estate investors who do not plan to buy or sell property derivatives.