Global integration of financial markets is so well advanced and pervasive that we take it as commonplace. Less appreciated is the global integration of property markets and investments. Below, I want to set out briefly the genesis of globalized real estate markets and also explore the challenges they provide for institutional investors.

Integration in Property Markets
Global financial markets were progenitors of global property markets. First, global financial institutions transmitted information to their clients about property markets in the so-called "global cities" where these institutions located. Second, prime income producing real estate has many characteristics in common with long-term bonds: reasonably predictable periodic payments; moderate risk; and ease of holding in a long-term portfolio.

There are growing signs of integration in urban property markets. Heightened media focus on property is evident in business periodicals around the world. Further, global property market integration has been greatly facilitated by free capital flow (no exchange controls) and the accumulation of huge institutional and family capital pools, many of which have already invested in either global real estate funds or direct foreign real estate investment. Finally, the emergence of professional global real estate investment managers and of securitized real estate and mortgage assets have added liquidity and attracted global investors too.

Challenges
As the past two decades have shown, real estate as an asset class poses significant challenges to investors. When moving into global real estate markets, additional challenges need to be addressed.

First, investors must pick winning cities, not just winning properties, as good properties located in cities with poor strategies are not likely to be good long- term choices. To do so, they will need to be able to critically assess the urban strategies being put forth by cities seeking to compete in the global economy.

Second, investors must understand that global real estate investing is a positive sum game where everyone can win by benefit of improved flows of information and learning over time.

Third, global real estate investment requires new skills and methods. For example, global real estate investors must be able to assess political risk. Additionally, they must develop first-rate local knowledge, local business networks, and trusted local partners. In particular, they must become familiar with local laws and rules.

Fourth, investors must think about building long-term relationships with local partners and not think in terms of one-off transactions, as is typical in the U.S. and Canada.

Fifth and last, prospective investors must become familiar with the quirks of local office, retail and housing preferences and styles, as for example the preference for wide aisles in Polish supermarkets and the dislike of open office plans in European markets.

Michael A. Goldberg is a Herbert R. Fullerton Professor of Urban Land Policy at the Faculty of Commerce and Business Administration, University of British Columbia.