Are Offices Really More Risky than Retail? A Note on Relative Real Estate Sector Risk

There is a notion – both among theoreticians and practitioners – that office properties are riskier than retail properties. There are passing references to this issue in existing literature, with no clear-cut conclusions. We set out to examine the investment risk of these 2 CRE sectors, using indices of real property and of REIT indices from the US market. We find that while in the past the notion that offices are riskier was correct, this is no longer true. We show that there has been a process of convergence, and currently the investment risk of retail is slightly higher