Many factors have played a role in shaping the publicly traded real estate industry, and these factors have also been instrumental in transforming real estate securities into a compelling investment option. However, there is ample room for growth—and it may well be that the 401(k) marketplace has the greatest potential for spurring significant growth in real estate stock investing over the next decade.

With total assets of more than $2.3 trillion, defined contribution plans are one of the largest sources of public investment capital in our economy. Yet, currently less than 0.1 percent of all defined contribution plan assets are invested in real estate stocks.

During NAREIT’s recent Institutional Investor Forum, the Association identified one of its primary goals for the year: the need to convince major defined contribution plan providers and sponsors to include real estate stocks as a core investment option. There is an immediate role for each and every one of us to play in this initiative.

Borrowing a page from last year’s successful effort to have real estate stocks included in Standard & Poor’s U.S. indices, each of us needs to directly engage our respective plan provider to request that real estate stocks be added to the allowable options under our plan.

In tandem with this demand for change, NAREIT staff members are meeting with major plan sponsors, as well as providers, to highlight the important diversification benefits available to plan participants from adding real estate stocks to their 401(k) investment portfolios.

As we engage the various constituencies of the investment community, we hope—and we expect—that more voices will be raised. As a recent report from Banc of America Securities pointed out, “providers will react to customer demand for real estate funds.” If 401(k) participants are educated so that they understand and appreciate the important benefits of current income and relative stability that real estate securities offer, this demand is bound to increase.

It’s up to us to keep getting the message out in order to change the status quo. And it all starts with a letter or a phone call.

William D. Sanders
NAREIT Chair