Market segmentation in real estate is influenced by location and the type of property use, such as residential or commercial. Investing in a single segment can be riskier, as it exposes one to fluctuations specific to that segment. For instance, investing solely in commercial spaces may suffer during a recession in that sector.


On the other hand, a diversified portfolio, including investments in various segments such as residential, commercial, and industrial, reduces risk through diversification. A decrease in demand or prices in one segment can be balanced by the strong performance of other segments, providing better protection against overall market volatility.