| Summary: | We live within, modify, design, create, develop and admire these tangible things we call houses, offices, shopping malls, coffee shops, restaurants, warehouses and apartments with their basic creation arising from a mere need, throughout history, to serve their principal purpose; provide a space to live, work and play. An evolution of the creation of these spaces physically and locationally over time is of equal importance to their evolution as a major vessel of value creation for individuals, corporations, public pensions and countries throughout history. This paper will highlight the evolution of commercial real estate as an investment vehicle in the United States throughout debatably the most crucial time period in its development, the 20th century. During this century the asset class evolved into one of the most sought after alternative investments and attracted all levels of investors from the individual retail investor up to the largest and most sophisticated institutional investors of the era.
Over time, these properties were physically erected with stone, steel, concrete and wood, but have been cloaked with a history of legislation and regulation, a history of booms and busts, and a history of securitizations resulting in what it has evolved into today. As much importance to the tangible nature that creates commercial real estate assets should be given to the intangible aspects that, with the stroke of a pen, have revolutionized a physical space into a major arbiter of wealth throughout history.
This paper was designed, at the start, to trace the who in terms of major capital allocators to commercial real estate during the 20th century. What has come about as a result of this research has been an additional focus on the how and the why. Much of the evolution of this investment vehicle, as well as the capital flows both into and out of the asset class, can be traced to major legislations passed during turbulent economic times throughout the century. It is of great importance to understand the reactions and development of this asset class during its initial evolution over time as well as the resulting impacts those had on the types of investors that made way into this unique asset class.
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