Report: Institutional Investor Portfolios Now Under-allocated to Real Estate

Institutions will lower by an average 10 basis points their real estate allocations for 2025 after two consecutive years of flat allocations, according to the 12th annual Institutional Real Estate Allocations Monitor report.

The report, published on November 12 by Hodes Weill & Associates and Cornell University's Baker Program in Real Estate, attributed the expected decline to the continued realignment toward other asset class allocations such as private credit and infrastructure.

While target real estate allocations are expected to remain at 10.8% in 2024, the report noted that target allocations increased by 190 basis points overall since 2013. Over the past 12 months, however, institutional portfolios have shifted to under-allocated from overallocated to real estate amid a strong showing from public equities and other asset classes.

Despite the relatively flat recent trendlines, the report indicated that investor sentiment is still moderately positive for real estate. Though persistent concerns about inflation, interest rates, and low transactions have kept them on the sidelines over the past two years, there is increasing conviction transaction volumes will rebound and provide more opportunities in the sector.

Source: https://www.hodesweill.com/real-estate-allocations-monitor