Real Estate investors rely on diversification as a tool to reduce the volatility of their portfoliosí performances. Diversification is the main channel to achieve overall risk reduction via combining together assets with different risk/return characteristics, as illustrated in Harry Markowitzís Modern Portfolio Theory (MPT). However, property maintains a certain degree of uniqueness, due to the local and fixed nature of the assets, and its behaviour is idiosyncratic, unlike other financial assets. Market segmentation is a technique to achieve diversification by means of clustering together those assets sharing similarities, as far as performance is concerned. Grouping property assets in segments maximises the variance of returns across segments whilst minimising that of individual assets within each segment. The study has been carried out in the UK market showing insightful results for portfolio managers, and is now replicated for the Italian market, moving from the IPD standard segmentation to explore alternatives.